Direct Merchants Credit Card Bank N.A., Scottsdale AZ, will pay $3.2 million to approximately 62,000 credit card customers under a consent agreement reached with the United States Office of the Comptroller of the Currency (OCC).
The charges stem from test campaigns mailed between March 1, 1999 and June 1, 2000. Of the 84 million credit card offers sent out by Direct Merchants Bank, a subsidiary of Minnetonka, MN-based Metris Companies Inc., 13.5 million listed one charge as a “processing fee” as opposed to a “finance charge”. Under the Truth in Lending Act, the two terms are not synonymous.
Additionally, roughly 500 customers were charged interest rates higher than those listed prominently in the mailed offers. The charges, according to the company, were no more than 1 or 2 percent, and Direct Merchants Bank will issue refunds.
While Direct Merchants Bank also admitted that, due to an oversight, it did not notify potential customers that it had used information from credit bureaus, as required by the Fair Credit Reporting Act. It has corrected the mistake.
According to a Direct Merchants Bank statement, the OCC has not determined what additional civil monetary penalties, if any, would be assessed.
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