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The FDIC has entered into a settlement with Comenity Bank and Comenity Capital Bank regarding their servicing and marketing of credit card add-on products. The liability premise involves Section 5 of the FTC Act, which prohibits unfair and deceptive practices and stems from the banks’ provision through third parties of payment protection/debt cancellation add-on products. As part of the settlement, both banks agreed to pay consumers a total of approximately $61.5 million in restitution, as well as civil money penalties of approximately $2.5 million. As part of the enforcement action leading to the consent order, the FDIC determined that the banks violated the FTC Act by:
Beyond the monetary implications, however, the orders contain remediation provisions that should guide other banks, particularly in their management of third party relationships. The Consent Orders require the implementation of an effective third party oversight program, which includes:
Financial service companies should carefully review the enforcement actions and the resulting consent orders of this settlement to identify regulatory points of emphasis and prohibited practices, in addition to regulatory guidance on what constitutes an effective compliance management system.
Caren Enloe leads Smith Debnam’ s consumer financial services litigation and compliance group. In her practice, she defends consumer financial service providers and members of the collection industry in state and federal court, as well as in regulatory matters involving a variety of consumer protection laws. Caren also advises fintech companies, law firms, and collection agencies regarding an array of consumer finance issues. An active writer and speaker, Caren currently serves as chair of the Debt Collection Practices and Bankruptcy subcommittee for the American Bar Association’s Consumer Financial Services Committee. She is also a member of the Defense Bar for the National Creditors Bar Association, the North Carolina State Chair for ACA International’s Member Attorney Program and a member of the Bank Counsel Committee of the North Carolina Bankers Association. Most recently, she was elected to the Governing Committee for the Conference on Consumer Finance Law. In 2018, Caren was named one of the “20 Most Powerful Women in Collections” by Collection Advisor, a national trade publication. Caren oversees a blog titled: Consumer Financial Services Litigation and Compliance dedicated to consumer financial services and has been published in a number of publications including the Journal of Taxation and Regulation of Financial Institutions, California State Bar Business Law News, Banking and Financial Services Policy Report and Carolina Banker. ...LEARN MORE