CompuCredit to repay $114 million under the settlement with FDIC

On the past week CompuCredit Corporation, Atlanta, Georgia, a company charged with deceptive marketing of subprime credit cards with three FDIC-supervised banks in violation of the Federal Trade Commission Act (FTC Act), achieved a settlement with the Federal Deposit Insurance Corporation (FDIC). Earlier this year two banks including Columbus Bank and Trust Company (CBT) and First Bank of Delaware, Wilmington, Delaware (FBD) settled with the FDIC.

Under the settlement terms CompuCredit will provide restitution of approximately $114 million to consumers in the form of credits for certain fees arising from the deceptive marketing practices. Some customers with current balances that are less than the amount of credits to be applied will receive cash refunds with the total refund amount of about $3.7 million while others will receive credits only. The order also includes a civil money penalty (CMP) of $2.4 million.

On June 10, 2008 the FDIC commenced enforcement actions against CompuCredit, First Bank of Delaware, Wilmington, Delaware (FBD), and First Bank & Trust, Brookings, South Dakota (FBT), for violations of the FTC Act in connection with the marketing of three types of credit card products. According to the FDIC the companies misrepresented upfront fees and the consumer's initial available credit. While being offered a $300 credit limit customers were immediately charged as much as $185 in inadequately disclosed fees and thus left with as little as $115 in available credit.

In addition, the Federal Trade Commission (FTC) also announced settlement of its parallel federal court action against CompuCredit and Jefferson Capital Systems, a subsidiary of CompuCredit, for violations of the FTC Act and the Fair Debt Collection Practices Act (FDCPA).