Travel Cards can be a Compliance minefield! The following narrative is from the Compliance Officer at the other bank in our holding company. It relates the opinions of the FDIC examiners conducting her bank’s Compliance Exam in the spring of 2011.
“Section 5 of the Federal Trade Commission Act prohibits deceptive acts or practices. To determine whether a representation, omission, or practice is deceptive, a three-part test is used. First the representation, omission, or practice must mislead or be likely to mislead the consumer. Second, the consumer’s interpretation of the representation, omission, or practice must be reasonable under the circumstances. Lastly, the misleading representation, omission, or practice must be material.”
“Specific concerns: the teller(s) failed to provide the disclosure regarding the fee(s) prior to selling the card; the lack of advance disclosure of the potential for ATM fees; and the lack of disclosure for the 800- number. These omissions do not give customers the opportunity to understand all of the terms and conditions associated with the product prior to purchase.”
“The disclosures are attached to the card, so the tellers would tell the customers about the $4.95 to purchase the card and the $4.95 to reload the card and then give them the whole thing. The disclosure should have been given to the consumer to read before loading the card.”
“The lack of disclosure before the sale of the card constitutes omission; a consumer would have no reason to anticipate either the monthly maintenance fee or the return fee, or the various other fees associated with the card’s use. A consumer would have no reason to expect to pay the fees associated with the card where they have already paid a fee for its issuance and has been informed of a fee to reload it. Lack of a disclosure could have affected the consumer’s decision on whether or not to purchase the card.”
“It was our fault the disclosures were not given prior to the sale, but the examiners had other issues with the pre-printed disclosures as well. The cards or the disclosures do not say that there is a fee for using the card at our bank’s own ATM. They are considered a foreign card and the consumer is charged a fee. A reasonable consumer would assume that because they bought the card at our bank that there would be no charge to use it at our bank’s ATM.”
“They also took issue with the 800-number on the back of the card. The card does not disclose the fact that there is a charge for inquiries and another charge to talk to a live person. A reasonable consumer, seeing an 800-number on the card could easily assume that not only is the call toll-free but the information they received in the call is free. The card is marketed for travel. Many consumers do not have the ability to go on-line to check their balances while traveling; therefore they may mistakenly see calling the 800-number as an advantage for checking their balances.”