The Consumer Financial Protection Bureau (CFPB) ordered Continental Finance Company LLC, a subprime credit card company based in Delaware, to refund an estimated $2.7 million to approximately 98,000 consumers who were charged illegal credit card fees.
According to the consent order, a credit union, which was not fined, contracted with Continental to issue fee harvesting credit cards.
The consent order notes that from at least April 2012 through December 2013, Continental contracted with a privately insured Illinois credit union for the credit union to issue credit cards on the Discover network: the Cerulean Card, the Matrix Card, and the Verve Card.
While the consent order does not name the credit union,my June 14, 2013 blog post identified the credit union as Services Credit Union in Naperville, Illinois.
Between approximately April 2012 and July 2013, over 290,000 cards were issued.
Under the agreements, the credit union issued the cards and immediately assigned the receivables to Continental for funding and servicing.
Once the credit union assigned its rights, Continental serviced the accounts from billing to collections, advanced all funds to consumers, and received all fees assessed pursuant to the cardholder agreements.
In approximately December 2013, the credit union terminated its sponsorship agreement with Continental. The credit union has not issued any additional Continental Cards since approximately July 2013.
What is missing from the consent order is how much this credit union was paid by Continental.
Read the consent order.
Read the press release.
Showing posts with label Credit Cards. Show all posts
Showing posts with label Credit Cards. Show all posts
Wednesday, February 4, 2015
Friday, June 14, 2013
Small Illinois CU Issuing Fee Harvesting Credit Card
Credit Union Times is reporting that Services Credit Union of Naperville (IL) is issuing a fee-harvesting credit card.
According to the article, the cards are issued through the credit union; but serviced through Continental Finance Company, which advertises that it "is one of America's leading originators of credit cards for consumers with less-than perfect credit."
To review the fees and interest rates on the Cerulean Card, click here.
Continental Finance on its webpage has the audacity to talk about the credit union difference of people helping people. If this is people helping people, then I don't want to be helped.
The Credit Union Times' article notes that Daniel Plauda, who is the President of the Illinois Credit Union League, is also the CEO of the credit union.
Read the story.
According to the article, the cards are issued through the credit union; but serviced through Continental Finance Company, which advertises that it "is one of America's leading originators of credit cards for consumers with less-than perfect credit."
To review the fees and interest rates on the Cerulean Card, click here.
Continental Finance on its webpage has the audacity to talk about the credit union difference of people helping people. If this is people helping people, then I don't want to be helped.
The Credit Union Times' article notes that Daniel Plauda, who is the President of the Illinois Credit Union League, is also the CEO of the credit union.
Read the story.
Saturday, August 11, 2012
CU Denies Out of Market Credit Card Purchases
The Morning Call published a story about a Pennsylvania credit union that refused to authorize a purchase on a credit card it issued because the purchase was not local.
First Commonwealth Federal Credit Union denied the purchase because it was concerned that the purchase could be fraudulent.
The credit union's CEO recommended that people should carry a second credit card and extra cash, just in case their cards are rejected while traveling.
I do a lot of traveling and have never had my credit card issuer reject a purchase because the purchase was not local. I thought one of the advantages of carrying a credit card is that you don't need to carry extra cash when you travel.
Read the story.
First Commonwealth Federal Credit Union denied the purchase because it was concerned that the purchase could be fraudulent.
The credit union's CEO recommended that people should carry a second credit card and extra cash, just in case their cards are rejected while traveling.
I do a lot of traveling and have never had my credit card issuer reject a purchase because the purchase was not local. I thought one of the advantages of carrying a credit card is that you don't need to carry extra cash when you travel.
Read the story.
Wednesday, August 11, 2010
GTE FCU: Most Unreadable Credit Card Agreement
According to analysis by CreditCards.com, GTE FCU in Tampa, Florida has the most unreadable credit card agreement.
CreditCards.com examined more than 1,200 agreements and graded every statement using a standard common in the teaching and textbook industries: the FOG Index.
The credit card agreement from GTE FCU required that an individual have a reading comprehension level of 18.5 years or the equivalent of a post graduate degree. Click here to see the video of people trying to read GTE's credit card agreement.
Eight of the 10 most unreadable agreements were from credit unions. However, the 10 most readable agreements were from credit unions.
CreditCards.com examined more than 1,200 agreements and graded every statement using a standard common in the teaching and textbook industries: the FOG Index.
The credit card agreement from GTE FCU required that an individual have a reading comprehension level of 18.5 years or the equivalent of a post graduate degree. Click here to see the video of people trying to read GTE's credit card agreement.
Eight of the 10 most unreadable agreements were from credit unions. However, the 10 most readable agreements were from credit unions.
Wednesday, March 17, 2010
Credit Unions Provide Good Lesson on Why Interest Rate Ceilings Are Bad Public Policy
Federal credit unions provide an excellent lesson regarding the unintended consequences associated with interest rate caps.
Currently, all federal credit unions are prohibited from increasing their loan rates beyond a current regulatory cap of 18 percent (12 U.S.C. §§1757(5)(A)(vii)).
On June 7, 2007, former NCUA Chairman JoAnn Johnson testified about the adverse impact of the interest rate cap on federal credit unions’ credit card operations.
NCUA Chairman Johnson pointed out that many federally insured credit unions may have sold or discontinued their credit card programs in recent years, because of rising variable costs and fixed interest margin potential. She noted that credit card portfolio brokers estimated that 318 credit unions have sold their credit card portfolios over the last five years. In other words, the inability to raise the interest rate in a rising interest rate environment did not allow the credit union to receive a risk-adjusted rate of return to warrant continuing this investment.
She also pointed out the interest rate ceiling limited the ability of credit unions to mitigate the higher credit risk of some borrowers through risk-based pricing. Therefore, the only way a credit union could manage such risk was to ultimately limit some credit union members’ access to credit.
While consumer advocates may think interest rate ceilings are the best idea since sliced bread, the experience of credit unions shows that price controls, such as interest rate caps, are bad public policy.
Currently, all federal credit unions are prohibited from increasing their loan rates beyond a current regulatory cap of 18 percent (12 U.S.C. §§1757(5)(A)(vii)).
On June 7, 2007, former NCUA Chairman JoAnn Johnson testified about the adverse impact of the interest rate cap on federal credit unions’ credit card operations.
NCUA Chairman Johnson pointed out that many federally insured credit unions may have sold or discontinued their credit card programs in recent years, because of rising variable costs and fixed interest margin potential. She noted that credit card portfolio brokers estimated that 318 credit unions have sold their credit card portfolios over the last five years. In other words, the inability to raise the interest rate in a rising interest rate environment did not allow the credit union to receive a risk-adjusted rate of return to warrant continuing this investment.
She also pointed out the interest rate ceiling limited the ability of credit unions to mitigate the higher credit risk of some borrowers through risk-based pricing. Therefore, the only way a credit union could manage such risk was to ultimately limit some credit union members’ access to credit.
While consumer advocates may think interest rate ceilings are the best idea since sliced bread, the experience of credit unions shows that price controls, such as interest rate caps, are bad public policy.
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