In its latest regulatory hit, Meta Financial Group Inc. will have to reimburse customers of a high-interest loan program marketed to prepaid cardholders.
The Office of Thrift Supervision notified the Storm Lake, Iowa-based company, whose MetaBank subsidiary issues prepaid cards for such companies as NetSpend Holdings Inc. and AccountNow Inc., of the decision on Dec. 28, Meta Financial noted in a Securities and Exchange Commission filing.
Besides requiring MetaBank to reimburse customers that used the iAdvance product, the OTS also is preparing a cease-and-desist order against the company and is considering assessing civil money penalties against the bank, according to the filing.
Meta said it does not know the amount it will be required to reimburse customers or whether monetary penalties will be imposed, but it expects “to discuss the terms of the cease-and-desist order as well as the reimbursement with the OTS prior” to the agency’s final determinations.
Problems with iAdvance came to light in October, when Meta announced the OTS was forcing it to shut down iAdvance after the agency determined it “engaged in unfair or deceptive acts or practices” in operating the program, which offers prepaid card users small lines of credit (
Under supervisory directives the OTS issued, Meta also is required to obtain the agency’s written approval to enter new business agreements or to materially amend existing ones.
The issue caused NetSpend, which operates prepaid card programs, to briefly delay its initial public offering and to seek new bank partners to issue its cards.
John Williams, an analyst who follows NetSpend for Goldman Sachs Group Inc., said in a research note Jan. 5 that the concerns over NetSpend’s risks stemming from its issuing banks are “a direct offshoot of increased regulatory pressure on payday lenders.”
NetSpend said in an SEC filing in November that MetaBank issued about 72% of its active cards as of Sept. 30.
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