Prepaid card issuer MetaBank will pay $4.8 million to customers under an order from regulators, in the latest fallout from a discontinued high-interest, small-balance loan product.
MetaBank's Storm Lake, Iowa, parent, Meta Financial Group Inc. said Monday in a filing with the Securities and Exchange Commission that it agreed to the cease and desist orders Friday to resolve claims that the bank engaged in unfair and deceptive practices in marketing the iAdvance program.
MetaBank also agreed to pay a $400,000 civil penalty to the Office of Thrift Supervision, the filing said. (The Office of the Comptroller of the Currency is set to absorb the OTS on July 21, as mandated by the Dodd-Frank Act.). MetaBank and its parent neither admit nor deny the OTS' claims.
As a result of the orders, Meta Financial Group recorded a $3.4 million after-tax charge in its fiscal third quarter, which ended June 30. All told, the company lost $1 million, or 33 cents per diluted share, compared to net income of $3.5 million, or $1.11 per diluted share, a year earlier.
"We are pleased to have consensually resolved the OTS matters in the interest of our shareholders," J. Tyler Haahr, Meta Financial's president and chief executive, said in a press release. "With the resolution of the OTS administrative actions we have put the uncertainty of the reimbursement and the assessment issues behind us."
In October, the OTS forced MetaBank to stop offering iAdvance, a type of payday loan product that it issued through various partners, including NetSpend Holdings Inc., a manager of prepaid card programs.
Under the cease and desist orders, MetaBank may not enter new business relationships with third parties for credit products, deposit products such as prepaid cards or automated teller machines or "materially alter" existing ones without OTS approval. It also may not originate tax refund anticipation loans.
MetaBank and its parent must also submit reports to the OTS on its efforts to comply with various regulations.
