Regulatory agencies levy heavy fines in light of UDAAP violations
In December, banking regulators announced a settlement with American Express Centurion Bank of Salt Lake City, Utah. The Bank was found to be in violation of Section 5 of the Federal Trade Commission (FTC) Act by participating in unfair and deceptive marketing practices related to “add-on products” for credit cards. Global training provider Banker’s Academy offers numerous compliance and regulatory courses to help financial institutions avoid similar violations and penalties.
On December 24, American Express Company announced on its website that the company was making a $76 million settlement with the Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), and the Consumer Financial Protection Bureau (CFPB). A review of the Bank’s credit products determined that the institution had violated federal law prohibiting unfair and deceptive practices by misrepresenting to consumers the costs, benefits, terms, and conditions of certain add-on products. Consumers were furthermore not informed of certain steps required for enrollment, and were unfairly billed for benefits not received.
In a press release by the OCC, the OCC announced that it is coordinating action with the CFPB and FDIC to assess civil money penalties to the tune of $16.2 million. The OCC and CFPB are taking further action against other affiliated institutions, namely American Express Travel Related Services Co. Inc. and American Express Bank, resulting in collective restitution of almost $60 million to over 335,000 consumers. American Express is also required to take steps to fix marketing and billing practices as well as consent to review by an independent third party.
In recent years, UDAAP-related scrutiny and enforcement has increased. On May 31, 2013, the FDIC announced settlements against First California Bank in Westlake, California, and Achieving Financial Services, LLP in Austin, Texas for Section 5 violations. In late 2012, Higher One Inc., a payment-card provider operating in Oregon, was required by the FDIC to pay $11 million to settle allegations of deceptive and unfair fee practices.
As regulatory agencies continue to implement Dodd-Frank reforms and the agencies themselves grow in strength and scope of authority, financial institutions face greater pressure to adhere to newly crafted rules and regulations, particularly in the realm of consumer protection. In an effort to avoid becoming the target of increased scrutiny, institutions will need to turn to more comprehensive education and employee training solutions.
Banker’s Academy is well-equipped to deliver key regulatory education concerning the FTC Act and CFPB’s standards defining what “unfair,” “deceptive,” or “abusive” means for institutions and consumers alike. Banker’s Academy offers full customizable eLearning solutions covering a range of compliance and regulatory topics and has been the preferred eLearning provider for over 25 years.
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