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