First Bank of Delaware has agreed to overhaul its consumer lending unit, which regulators have said is engaging in unsafe banking practices.
According to a cease-and-desist order issued Oct. 9 and made public last week, the Wilmington community bank's national consumer products division has an "inadequate compliance management system" and is "operating without effective oversight by bank's board."
The order, from the Federal Deposit Insurance Corp., required First Bank to hire an independent consultant to help develop a plan to revamp the unit, and to terminate its relationships with third-party lenders, such as CompuCredit Corp. It must also provide regular updates regarding its progress in developing and implementing a new business plan for the unit.
In June, the FDIC said First Bank had engaged in deceptive marketing practices related to its subprime credit card products from CompuCredit, and sought $35 million in restitution, as well an another $150 million from CompuCredit. Two other banks were named in that complaint.
In the October order, First Bank agreed to place $700,000 into an account that may be used to cover restitution to some consumers if certain conditions are met.
It was also ordered to pay a fine of $300,000.