Community Trust Bank to return $4.75M in fees

The Federal Reserve Board has issued a consent order against Community Trust Bank, Inc., Pikeville, Kentucky, for unfair and deceptive practices, requiring the bank to pay about $4.75 million in restitution to approximately 11,000 consumers and to make certain enhancements to its consumer compliance program.

The Board found that the bank violated section 5 of the Federal Trade Commission Act in its offering of deposit account add-on products to consumers. The bank represented to consumers that all of the add-on product benefits would be effective upon enrollment when, in fact, consumers had to take additional steps to receive some of their benefits. The bank did not adequately disclose the additional steps prior to enrollment and did not explain to consumers that they would be billed regardless of benefit activation.

The Order covers the bank's practices from November 1994 through January 2017. The bank offered, through third parties, products containing bundles of consumer benefits to its deposit accountholders. The bundles includes benefits such as payment card protection, lost key protection, and medical emergency data cards. In its marketing, the Bank represented to accountholders that the full bundle of benefits of the Initial Add-On Products would be effective upon enrollment. In fact, to the contrary, the accountholders had to take certain steps post enrollment to receive some of their benefits. The Bank did not adequately disclose this two-step enrollment process to the accountholders at or prior to the time of enrollment, or that the accountholders would billed regardless of benefit activation.

The Bank also acquired deposit accounts from another insured depository institution where the accountholders had already enrolled in certain of the Initial Add-On Products, and after acquiring these deposit accounts from that insured depository institution, the accountholders were charged monthly fees despite the fact that the accountholders did not receive all of the benefits included in the Initial Add-On Products.

By at least December 2002 and generally continuing through on or about January 2018, the Bank charged accountholders who enrolled in the Initial Add-On Products fixed monthly fees varying between $2 and $10 despite the fact that many of the accountholders did not receive all of the benefits included in the products that were sold to them. The Bank generally stopped charging accountholders who enrolled in the Initial Add-On Products in January 2018, but continues, through its third party, to charge full monthly fixed fees to some accountholders enrolled in some, but not all of, the Initial Add-On Products. Since at least December 2002, the Bank collected the fixed monthly fee payments by debiting the accounts of at least approximately 4,270 accountholders, despite the accountholders not receiving all of the benefits included in the Initial Add-On Products.

From October 2008 to November 2012 the bank also marketed an identity protection product to its accountholders, involving the same practices of representing that accountholders would receive the full bundle of benefits on enrollement, but additional accountholder steps were necessary and were not adequately disclosed.

The Board found those practices to be unfair or deceptive acts or practices and unsafe or unsound banking practices.

The bank was ordered to set aside $4.75 million for restitution to accountholders of the fees charged, formulate a plan for restitution acceptable to the Board, make restitution after getting no objection to the plan, and make a series of improvements to its consumer compliance program, refrain from marketing deposit add-on or similar products without a written plan acceptable to its Reserve Bank, improve oversight of the bank's compliance risk management program by the bank's board and senior management, and submit a plan to enhance the bank's management of third-party vendors supplying consumer products and services.