Compucredit Settles MASSIVE Consumer Lawsuit!

2009-01-23T09:47:00.000-08:00

December 19, 2008

CompuCredit, an Atlanta-based provider of subprime credit cards, including the ASPIRE VISA, has agreed to a $116 million settlement of accusations that it engaged in deceptive marketing practices, federal regulators said Friday.

Under the settlement with the Federal Deposit Insurance Corp. and the Federal Trade Commission, CompuCredit has agreed to credit $114 million to certain customer accounts that were opened between 2001 and 2005. The company also will pay a $2.4 million penalty to the U.S. Treasury.

The settlement does not require CompuCredit to change its current marketing or servicing practices and will not have a material impact on its finances, the company said.

“We are pleased to have reached this settlement with the FDIC and the FTC in order to resolve their concerns regarding the company’s past marketing practices,” David Hanna, CompuCredit’s chairman and CEO said in a statement Friday.

Federal regulators in June said they were investigating alleged deceptive marketing practices by two banks and CompuCredit. Uncle Sam was seeking a combined $200 million in restitution and civil fines. A third bank, Columbus (Ga.) Bank & Trust, agreed to pay a $2.4 million fine and set up a $7.5 million restitution fund, regulators said at the time.

In one example, the agencies said CompuCredit marketed credit cards with a $300 limit, but it failed to adequately disclose that customers would be charged up to $185 in up-front fees that immediately reduced their available credit to $115. This often lead to additional penalties for exceeding credit limits.

The enforcement action was part of a broader investigation of subprime lenders by the FTC and the FDIC.

The $114 million of credits will offset some of those fees. The majority of the credits will be made to accounts that have a negative balance. However, CompuCredit said it likely will have to make $3.7 million in payments to eligible customers who do not have a negative balance on their cards.

“The enforcement actions brought by the FDIC and the settlement reached today underscore the FDIC’s commitment to address the harm suffered by consumers due to inadequate credit card disclosures and predatory lending practices,” FDIC board member Thomas Curry said in a statement.

Customers do not need to do anything to receive a credit; CompuCredit said the company will contact those who are eligible to receive credit or a payment. Credits and cash refunds will be verified by an independent accounting firm acceptable to the FDIC, the agency said.

“This settlement is a big win for customers,” Lydia Parnes, FTC’s consumer protection bureau director, said in a statement.

Compucredit Watch

Compucredit Settles MASSIVE Consumer Lawsuit!