Feds say Vegas bank deceived consumers

Wednesday, Dec. 5, 2001 | 10:42 a.m.

A Las Vegas-based bank specializing in issuing secured credit cards to customers with low credit ratings or no credit history has settled a class-action lawsuit as well as a complaint from the Office of the Comptroller of the Currency.

First National Bank of Marin issued a statement Tuesday that said under terms of the agreement it would reimburse customers who applied for the bank's credit card between July 27, 1996, and May 31, 2001, and who were charged enrollment fees and some finance charges.

A spokesman for the Office of the Comptroller said the bank was required to establish a $4 million account to handle restitution payments. The bank will submit additional money, if necessary, to fully fund the reserve in the next two months.

"The OCC concluded that the bank's conduct in marketing its secured credit card constituted unfair and deceptive practices in violation of the Federal Trade Commission Act and was unsafe and unsound within the meaning of the Federal Deposit Insurance Act," said Dean DeBuck, a spokesman for the office.

DeBuck said under the bank's program, the funds for a required savings deposit were charged against the customer's credit line, reducing the amount of available credit until the charge was paid off. As a result, most customers received a credit card with little or no available credit.

DeBuck said the consent order requires the bank to refund application and other fees to consumers who received a credit card with less than $50 in available credit and canceled the card within 60 days after the card was issued. In addition, the order requires that the bank refund application fees to consumers who learned that they were to receive a card with $50 or less in available credit and before receiving their card canceled their application or failed to complete the application.

In the bank's statement, the company did not admit to wrongdoing, but said it did not believe the comptroller's office correctly interpreted FTC regulations.

FNBM Chief Executive Officer Robert DeJong said a Rhode Island court has ruled that the Office of the Comptroller does not have the power to enforce the FTC Act. He also said Office of the Comptroller regulators have made suggestions on the bank's solicitations that have been implemented to head off problems, but the bank was still accused of deception.

"This settlement enables First National to continue moving forward with providing quality credit products and services to our customers, which is our top priority," DeJong said.

Bank officials did not immediately have specific information on how many plaintiffs participated in the class-action suit or in what court it was filed. DeJong said the bank plans to review its records of accounts opened during the 58-month period and send checks to customers affected by the settlement.

FNBM has 550,000 customers nationwide and has issued more than 1 million credit cards, placing it in the nation's top 50 credit card lenders, DeJong said. The bank was chartered in 1984 in Northern California's Marin County and operated there until 1998, when it relocated to Las Vegas and kept its name.