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Regulators are going after credit card programs offered to credit challenged consumers that end up producing little, if any, available credit. This week the Office of the Comptroller of the Currency has forced First National Bank in Brookings, South Dakota, to pay $6 million in restitution to credit card customers harmed by its marketing practices. Under FNB’s credit card programs, customers were required to pay $75 to $348 in application fees, and were subject to security deposits or account holds ranging from $250 to $500. Because of the high fees and required deposits, a high percentage of applicants received cards with less than $50 of available credit when the cards were issued. In another program, the bank’s television commercials promised a “guaranteed” card with no “up-front security deposit” and a credit limit of $500. The bank then placed a $500 “refundable account hold” on the $500 credit line. As a result, customers received a credit card with no available credit when the card was first issued. In another program, customers were required to make a $100 security deposit before receiving a card with a $300 credit limit. An additional security deposit of $200 and a $75 processing fee were charged against the card when it was first issued. As a result, the customers who received the card had only $21 of available credit when the card was first issued. The OCC says the bank also engaged in a number of practices that the OCC believes may have confused customers. For example, in a third program, the bank advertised a card with no annual fee, but which carried monthly fees. Although those fees were disclosed, the OCC believes that monthly fees effectively function as annual fees.

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