Iowa Bank Appeals OCC Stop Order

WASHINGTON - A $128 million-asset Iowa bank has decided to fight a cease-and-desist order from the Office of the Comptroller of the Currency.

The First National Bank of Council Bluffs has appealed to the U.S. Court of Appeals for the Eighth Circuit, which sits in St. Paul, Minn., and St. Louis.

In this rare appeal of a regulatory sanction, the bank contends that the Comptroller took unfair and arbitrary action in ordering it to reimburse customers nearly $50,000 after allegedly failing to disclose the correct annual percentage rate on 700 installment loans.

"There wasn't any question that the bank was acting in good faith," said James B. Cavanagh, First National's attorney.

Low Initial Rate

From 1986 to 1988, the bank disclosed a low interest rate for the first year of consumer loans. After the first year, the discount was no longer in effect. But the Comptroller said the bank misled consumers by not saying that market rates after the first year would be higher.

"It was difficult for [borrowers] to compare one bank against another bank's offer of credit," said Neil M. Robinson, a lawyer in the Comptroller's office.

The cease-and-desist order also encompassed about 15 residential real estate loans in 1987. The Iowa bank failed to include the cost of private mortgage insurance premiums in disclosures of annual percentage rates.

The order would require the bank to explain in writing to each account holder that the disclosures were faulty.

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