By Jeff Bater
A Missouri community bank is settling with the Federal Reserve for $5 million over allegations of deceptive marketing of balance transfer credit cards.
A Fed consent order announced Oct. 26—the same day the regulator approved the bank’s acquisition by another Missouri lender—requires Mid America Bank and Trust Company, of Dixon, Mo., to pay restitution to nearly 21,000 affected cardholders. The bank was accused of violating the Federal Trade Commission Act.
Mid America offered the cards through third parties as a way to give consumers the potential to settle debt while obtaining an extension of new credit. Under the Fed order, the bank will be required to refund fees paid by cardholders in connection with the deceptive practices.
The order for restitution involves three separate credit card portfolios acquired by Mid America.
The bank marketed cards from one of those portfolios from mid-2009 through 2011. It allegedly failed to disclose that finance charges and fees would reduce the amount of new credit available to a consumer after making a payment, according to the Fed.
Because of the lack of disclosure, consumers could have reasonably believed that by continuing to make timely minimum monthly payments on a card, they would receive credit equal to the amount they paid, the Fed said, adding, “In fact, they did not due to the assessment of finance charges and fees.”
The bank did not respond to a request for comment.
The settlement was announced on the same day the Fed said it approved a proposed acquisition of Mid America by another Missouri lender, Reliable Community Bancshares, of Perryville.
Reliable, with consolidated assets of approximately $1.4 billion, controls Bank of Missouri. Mid America has $159 million in assets.
The order approving the acquisition referred to Mid America’s alleged FTC violations involving balance transfer credit cards.
Bank examiners noted the alleged violations contributed to a rating of “needs to improve” in the latest evaluation of Mid America under the Community Reinvestment Act, according to the Fed. The 1977 law requires banks to help meet the credit needs of the communities they are chartered to serve.
The Fed said its order approving the acquisition is conditioned on Reliable’s compliance with a commitment to cause Bank of Missouri, as successor to Mid America Bank, to comply with the obligations of the settlement.
To contact the reporter on this story: Jeff Bater in Washington at email@example.com
To contact the editor responsible for this story: Michael Ferullo at MFerullo@bna.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)