May 04, 2010
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News: Cabela's Improperly Assess CC Fees
Ouch! $12 Million! I said, $12 Million. That's the amount the World's Foremost Bank may need to cough up for charging credit card customers of the World's Foremost Outfitter illegal fees. In a first quarter company report, Cabela's, World's Foremost Outfitters the parent company of the World Foremost Bank, revealed that the Federal Deposit Insurance Corporation (FDIC) audit conducted in 2009 indicated concern that the bank may have "improperly assessed" its credit card fees which include over-the-limit, penalty interest rates and late fees. The report indicated that credit card customers with a World Foremost Bank open account over the past six years have been affected.
Additionally, the FDIC report also indicated that the bank had used improper collection practices. In their release, Cabela's said the bank has already corrected the practices leading to the errors. Nevertheless, the giant outfitters retailer said it would not be possible to resolve all the issues affecting its credit card users and therefore it has decided to set aside the $12 million for maximum liability. No mention was made as to whether or not credit card customers have been notified. Despite the $12 million charge, Cabela's adjusted net income rose to $8.1 million, a 58 percent increase from same time last year.
Cabela's first quarter total revenue increased by 5.1 percent while its retail sales operations decreased by 1.5 percent. Two of its divestiture businesses, Van Dyke's taxidermy business and Wild Wings contributed to $7.1 million of revenue. Financial services revenue increased by a whopping 77 percent from same time last year, primarily due to higher credit card interest and fee income. Although members of the company were not available for comment, Cabela's Chief Executive Officer, Tommy Millner, stated in the release that the company was pleased with its growth especially that displayed in its internet sales business. The company is also pleased to note that sales have been higher than expected in its firearms and ammunition business. Fishing, camping, footwear, optics and gifts have also been good performing categories for the retailer.