WASHINGTON — The Bancorp Bank in Wilmington, Del., has agreed to pay $4.3 million on charges brought by the Federal Deposit Insurance Corp. that the prepaid card issuer deceived consumers.
The bank, which issues prepaid cards for nonbank entities, was charged for not following through on giving certain protections and rewards benefits as promised for specific card products as well as using deceptive fees on reloadable cards. Bancorp Bank has agreed to pay a $3 million civil money penalty and $1.3 million in restitution to about 21,000 affected consumers.
The FDIC said the Bancorp Bank charged "deceptive" debit decline fees on reloadable prepaid cards. The bank was also cited for not providing protections it promised to consumers when resolving errors on an account; nor did it provide promised benefits for a debit card rewards program that it offered along with a third-party service provider.
"As the issuing bank for these various programs, The Bancorp Bank was responsible for ensuring that these programs were operated in compliance with all applicable laws," the FDIC said in a press release issued Wednesday. "The FDIC orders require The Bancorp Bank, among other things, to promptly implement practices to ensure that the intake, investigation, and resolution of error claims for all of its prepaid cardholders are properly executed. In addition, The Bancorp Bank, under a corrective action plan, is required to take remedial measures regarding certain prepaid cardholders who asserted or attempted to assert error claims and to provide restitution to cardholders harmed by certain error resolution practices."
Bancorp Bank was cited for violating the Federal Trade Commission Act in using unfair and deceptive practices.
The company did not respond to press requests by deadline.