Last week, the Consumer Financial Protection Bureau ordered Continental Finance Company LLC, a credit card lender, to refund an estimated $2.7 million to approximately 98,000 consumers.  The CFPB found that the company’s subprime credit cards misrepresented certain fees and hit consumers with illegal charges.  The order also requires the company to pay a civil penalty of $250,000.

“Continental Finance misled consumers and charged them illegal fees,” said CFPB Director Richard Cordray.  “These excessive fees are especially harmful because the cards were targeted to consumers with subprime credit who are often economically vulnerable.  We will act to protect people who are wronged in this market.”

Continental designs and markets credit cards targeted at consumers with subprime credit.  The CFPB investigation found that violations occurred in connection with Continental cards issued between April 2012 and July 2013.  Specifically, the CFPB alleged that Continental Finance misled consumers about credit card costs, charged illegal credit card fees, and misrepresented account insurance by stating in some consumer cardholder agreements that security deposits consumers provided for certain credit cards would be “FDIC insured” when, in reality, for a time period many funds were not FDIC-insured.

The CFPB found that Continental engaged in deceptive acts or practices by misrepresenting the paper statement fee and whether security deposits would be “FDIC insured.”  The CFPB also found that Continental violated the Truth in Lending Act by requiring consumers to pay fees over 25 percent of the credit limit during the first year after account opening.  To address these violations, the CFPB’s consent order requires Continental Finance to: 

  • Provide full refunds totaling approximately $2.7 million to 98,000 consumers;
  • Cease engaging in the illegal practices mentioned above;
  • Be subjected to CFPB supervision for the first time; and
  • Pay a $250,000 civil penalty fine.

Troutman Sanders will continue to monitor the CFPB’s enforcement actions and any related consent orders.