International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Wednesday, October 1, 2014

FDIC Forces Merrick Bank To Stop Deceptive Payment Protection Credit Card Practices

800px-FdicLogoThe FDIC required Merrick Bank to stipulate to a Consent Order, Order for Restitution, and Order to Pay Civil Money Penalty.  The FDIC Order requires the Bank to pay a civil money penalty (CMP) of $1.1 million, and restitution of approximately $15 million to harmed consumers. 

The Bank marketed the "PAYS Plan," a payment protection credit card add-on product that was sold from 2008 to 2013 to consumers who had a Bank credit card. The PAYS Plan provided a benefit payment towards a consumer's monthly credit card payment following certain life events such as involuntary unemployment, disability, and hospitalization.

The FDIC determined that the Bank violated federal law prohibiting unfair and deceptive practices by, among other things:

  • misrepresenting that the PAYS Plan "Monthly Benefit" would equal the consumer's "Minimum Payment Due";
  • misrepresenting that the PAYS Plan would protect the consumer's credit rating;
  • misrepresenting that PAYS Plan payments would be made automatically;
  • failing to adequately disclose material conditions and restrictions related to the PAYS Plan;
  • failing to adequately disclose the terms and conditions for accessing the PAYS Plan hospitalization benefit; and
  • requiring permanently disabled consumers to recertify their disabled status each month.

Merrick Bank was founded in 1997 and is a top-25 issuer of Visa® cards.

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