Upwards of 243,000 Harmed Consumers Who Were Assessed Transaction Fees Exceeding What Bancorp Bank Disclosed to Receive Approximately $1.3 million in Restitution
On March 7, 2018, the Federal Deposit Insurance Corporation (“FDIC”) announced a settlement with The Bancorp Bank, Wilmington, Delaware, relating to unfair and deceptive practices in violation of Section 5 of the Federal Trade Commission Act (Section 5). Further, the FDIC found that the bank violated the Electronic Funds Transfer Act, the Truth in Savings Act, and the Electronic Signatures in Global and National Commerce Act.
As part of the settlement, The Bancorp Bank stipulated to the issuance of an Order for Restitution and Order to Pay Civil Money Penalty. The Order for Restitution requires the bank to prepare a comprehensive restitution plan, and to pay restitution of nearly $1.3 million to approximately 243,000 harmed consumers who were assessed transaction fees exceeding what the bank disclosed. The Order for Restitution also requires The Bancorp Bank, its institution-affiliated parties, and its successors and assigns to fully comply with Section 5. The Order to Pay requires the bank to pay a civil money penalty of $2.0 million. According to the FDIC, consumers who are eligible for relief under the settlement are not required to take any action to receive compensation.
The Bancorp Bank Overcharged Transaction Fees for Certain Point-of-Sale, Signature-Based Transactions on Certain Stored-Value Cards, Including the Bank’s Excella Visa Prepaid Debit Card
The Bancorp Bank issues prepaid cards on behalf of numerous non-bank entities. The FDIC determined that the bank violated Section 5 by overcharging transaction fees for certain point-of-sale, signature-based transactions (i.e., transactions not requiring a personal identification number or PIN) on certain stored-value cards, including the bank’s Excella Visa Prepaid Debit Card. As the issuing bank for these various prepaid cards, The Bancorp Bank was responsible for ensuring that these programs were operating in compliance with all applicable laws.
The Bancorp Bank Restitution Plan
According to the Order for Restitution’s “Restitution Plan”:
Within thirty (30) days from the effective date of [the] ORDER, the Bank shall prepare a comprehensive restitution plan . . . for all past and present holders of Excella Cards (“Excella Consumers”) and Non-Excella Cards (“Non-Excella Consumers”) who from December 3, 2010 through November 8, 2014 were assessed transaction fees for PINless transactions that exceeded the amount of the fee the Bank disclosed to Excella Consumers and Non-Excella Consumers for such transaction (“Excess Transaction Fees”) and who are therefore entitled to reimbursement (“Eligible Consumers”). The Bank shall submit the Restitution Plan to the Regional Director of the FDIC’s New York Regional Office (“FDIC Regional Director”) for his review, comment, and non-objection prior to implementation of any actions still to be performed under the Restitution Plan.
The Restitution Plan shall distinguish between Eligible Consumers to whom reimbursement has already been made (“Previously Reimbursed Eligible Consumers”) and those who are entitled to reimbursement, including consumers who were mailed reimbursement checks that have not been cashed, (“Unreimbursed Eligible Consumers”) and shall: (a) identify all Eligible Consumers; (b) specify the methodology for calculating the amount of restitution for each Eligible Consumer; (c) describe the process for providing restitution to all of the Eligible Consumers for Excess Transaction Fees assessed by the Bank, including the manner in which restitution was or will be paid and the time frames for such payments; (d) describe, for cash restitution made by United States Postal Service first class mail to Previously Reimbursed Eligible Consumers, (i) the Bank’s processes for prior and future attempts to locate those Eligible Consumers whose payments were or may be returned to the Bank as undeliverable, which shall be consistent with the standards set forth in Paragraph 7 of this ORDER; and (ii) the Bank’s processes for prior and future attempts to contact Eligible Consumers whose reimbursement checks remain uncashed thirty (30) days after the reimbursement checks were mailed shall be consistent with the standards set forth in Paragraph 7 of this ORDER; and (e) provide for payment of restitution to all Unreimbursed Eligible Consumers within ninety (90) days of receipt of non-objection to the plan from the FDIC Regional Director as required in Paragraph 3 of this ORDER.
. . .
The Bank shall fully implement the Restitution Plan, including making payments or providing credits to all of the Eligible Consumers, within ninety (90) days of receipt of nonobjection from the FDIC Regional Director. Any required restitution shall be made by credits to the Excella Card Accounts and Non-Excella Card Accounts of Eligible Consumers. If, as of the date that restitution is made, an Eligible Consumer’s Excella Card Account and/or Non-Excella Card Account has been closed, charged off, sold, or otherwise transferred, the amount of restitution to which the Eligible Consumer is entitled shall be made by bank or certified check (“Restitution Check”) mailed to the holder of the Account as provided below. Restitution provided by the Bank under this ORDER shall not limit consumers’ rights in any way.