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Comenity banks settle with FDIC for deceptive practices with credit card add-ons

09/08/2015
Fine Amount: 
$2.45 million plus $61.5 million restitution
Penalty Type: 
Issued by: 

The Federal Deposit Insurance Corporation has announced a settlement with Comenity Bank, Wilmington, Delaware, and Comenity Capital Bank, Salt Lake City, Utah, for deceptive practices related to the marketing and servicing of credit card "add-on products," in violation of Section 5 of the Federal Trade Commission Act. The banks are both wholly-owned subsidiaries of Comenity, LLC, Columbus, Ohio.

As part of the settlement, each of the banks stipulated to the issuance of a Consent Order, Order for Restitution, and Order to Pay Civil Money Penalty. Under the FDIC orders, Comenity Capital Bank will pay a CMP of $450,000 and provide restitution of approximately $8.5 million to harmed consumers.Comenity Bank will pay a civil money penalty (CMP) of $2 million and provide restitution of approximately $53 million to harmed consumers.

The FDIC determined that the banks violated Section 5 by, among other things:

  • Representing to consumers that they would not be charged a fee for the products if their accounts had no balances, but charging fees to consumers in those circumstances.
  • Making material misrepresentations and omissions regarding the refund process applicable to consumers' cancellations of the products within the first 30 days of enrollment.
  • Making material misrepresentations and omissions regarding the conditions for receipt of the gift cards or account statement credits offered as incentives for enrolling in the products.

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