Bank to Pay $4.5 Million to Settle Suit Over Cards

NEW YORK -- A bank has agreed to pay $4.5 million to settle a claim by the New York state attorney general that it deceptively marketed credit cards to people with bad credit ratings, The New York Times reported.

In some cases, the attorney general, Andrew M. Cuomo, said, recipients were charged fees in advance for cards that used up most of their credit limit, even though the bank had promised no processing fees for opening an account. That meant that the customers faced debt before even using the credit cards. Mr. Cuomo said that under state law, customers are not required to pay such upfront fees until they start using the cards, the paper reported.

The bank, First Premier Bank, of Sioux Falls, S.D., will also pay $105,000 in penalties and costs, Cuomo said. The bank did not admit liability in the settlement, the paper repotred.

First Premier disagreed with Cuomo’s claim that its marketing was deceptive. In a statement, Miles Beacom, the chief executive, said, “We have operated our business with the highest level of integrity.” He said that the bank had changed most of the practices criticized by the attorney general several years ago. The settlement agreement notes that in November 2003, First Premier stopped advertising that its cards had no processing fees, the paper reported.

“These were common business practices within the industry, and we discontinued these practices on our own initiative a number of years ago,” he said, according to the paper.

-- NYSSCPA.org News Staff

Posted on 8/15/07