Subprime Credit Card Company Ordered to Return Millions
By Consumers Union on Wednesday, February 4th, 2015
Continental Finance Company, a company that markets credit cards to folks with dinged-up credit, agreed today to refund an estimated $2.7 million to tens of thousands of customers to compensate them for illegal fees and charges, according to a consent order Continental signed with the Consumer Financial Protection Bureau (CFPB).
Continental credit cards carried annual fees of about $75 and a monthly paper statement fee of $4.95 that was characterized as optional but it really wasn’t. These fees were for credit cards with credit limits of $300, which meant they violated rules laid down by the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act.
The CARD Act bans fees in excess of 25% of the credit limit during the first year an account is open. For cards with a $300 credit limit, the lender can only charge $75 in fees the first year. With the $4.95 monthly fee on top of the $75 annual fee, Continental was violating that rule.
Continental also lied about FDIC insurance for funds deposited as security deposits. Continental said these funds would be “FDIC insured” when, in reality, for a time period many funds were not FDIC insured.
Consumers who are due a refund don’t need to do anything. They will either get a credit to their account, a check in the mail, or both, depending on their circumstances, according to the CFPB.
Continental will also have to pay a $250,000 penalty, and submit to CFPB supervision, allowing the CFPB ongoing oversight of the company to ensure harmful practices do not reoccur.
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