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Many big retailers have been getting out of the credit card business by selling their receivables and outsourcing the work to banks, but Cabela's Inc. has been expanding its credit card arm.
September 22
WASHINGTON — World's Foremost Bank, a $2.9 billion-asset institution in Sidney, Neb., will pay fines of more than $10 million to settle allegations of unfair and deceptive practices, the Federal Deposit Insurance Corp. said Tuesday.
The agency alleges the bank, which is the bank unit of Cabela's Inc., an outdoors merchandiser, violated provisions of the Federal Trade Commission Act and the Truth in Lending Act in how it imposed credit card penalties. The FDIC cited the bank for alleged impropriety in how it charged overlimit fees and imposed credit-line decreases, among other charges.
The bank has agreed to a consent order with the regulator, requiring the bank to cease certain practices in question, including assessing a second over-the-credit-limit fee after a customer exceeded the limit during the previous billing cycle and was already penalized for it. World's Foremost Bank will pay restitution of over $10 million to current and past cardholders, as well as a civil money penalty of $250,000.
"The consent order, in part, requires WFB to correct the violations of law, develop appropriate policies and procedures to ensure future compliance, and effectively monitor third-party agreements and activities," the FDIC said.
Other provisions in the consent order instruct the bank to stop various alleged acts. Those include the bank's contacting cardholders at their employers to collect debts, despite a verbal or written request by cardholders or employers not to contact the place of business; imposing overlimit fees based on a reduced credit limit, even though the fee was applied to a balance that predated the credit line decrease; and setting minimum period payment amounts that are "insufficient to avoid recurring" overlimit fees.
The bank will also "refrain from the bank's prior practice of assessing late fees when periodic payments are due on Sundays or holidays and the payment is posted the following business day," the order said.
A voicemail message left at the bank was not immediately returned
