FDIC Fines Bank Over Deceptive Loan Interest Rate Rebate Promotion

The FDIC recently announced a Consent Order against a state-chartered Bank based on allegedly deceptive fees concerning the Bank’s “no interest” and “full interest rebate” marketing promotions.

The Bank’s marketing promoted “no interest” and a “full interest rebate” if the customer repaid their loan in full during the first 90 days of the loan, but charged a “rebate processing fee” of up to $40 for loans paid off in full during the first 90 days.  The FDIC alleged that the fee was in fact calculated as a function of accrued interest, which made the marketing deceptive in violation of Section 5 of the Federal Trade Commission Act. 

The order requires the Bank to pay a $315,000 civil money penalty.  The Bank consented to entry of the order without admitting or denying any violations of law or regulation.