By Lisa M. Goolik, J.D.
A Delaware company that marketed "fee-harvester cards" to subprime borrowers has agreed to refund more than $2.6 million in fees and pay a $250,000 civil penalty to settle charges brought by the Consumer Financial Protection Bureau that it imposed excessive fees in violation of the Credit Card Accountability, Responsibility, and Disclosure Act.
Under the CARD Act, fees are limited to 25 percent of the account credit limit in the first year after an account is opened. According to the CFPB, Continental Finance Company, LLC, generally gave consumers a $300 credit limit and charged a $75 fee—the highest fee permitted. However, Continental ran afoul of the limit when it added a $4.95 monthly fee for paper billing statements. Consumers were sent paper statements automatically and effectively could not opt out. The $4.95 per month, when added to the initial $75 fee, exceeded the 25-percent limit, the CFPB says.
The expected $2.67 million in refunds represents the paper statement fees imposed by Continental.
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