The Federal Deposit Insurance Corporation has settled charges under Section 5 of the Federal Trade Commission Act that a South Dakota bank charged unfair or deceptive credit card overlimit fees.

Through a Consent Order and Order to Pay announced January 29, 2010, the FDIC requires 1st Financial Bank USA to discontinue its practice of assessing a second overlimit fee on the first day of a billing cycle when a cardholder was charged an overlimit fee for exceeding the credit limit on the last day of the prior cycle.  It also requires 1st Financial to pay approximately $10 million in restitution and a $140,000 civil money penalty. 

In 2008, much attention was sparked by the FDIC decision to bring Section 5 charges against CompuCredit and several bank issuers of subprime cards marketed or serviced by CompuCredit. In 2009, the FDIC brought Section 5 charges against American Express Centurion Bank and Advanta Bank Corp. relating to their credit card practices. So far, the FDIC has primarily used its Section 5 authority in the credit card arena. This latest action shows that the FDIC remains willing to flex its muscles under Section 5 of the FTC Act when it sees acts and practices it finds unfair or deceptive.

Ballard Spahr’s Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs). For more information, please contact group Chair Alan S. Kaplinsky, 215.864.8544 or kaplinsky@ballardspahr.com; Vice Chair Jeremy T. Rosenblum, 215.864.8505 or rosenblum@ballardspahr.com; John L. Culhane, Jr., 215.864.8535 or culhane@ballardspahr.com; Barbara S. Mishkin, 215.864.8528 or mishkinb@ballardspahr.com; or Mark J. Furletti, 215.864.8138 or furlettim@ballardspahr.com.


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