On May 11, 2017, the Federal Deposit Insurance Corporation (“FDIC”) announced settlements with Bank of Lake Mills and two of its institution-affiliated parties, Freedom Stores, Inc. and Military Credit Services, LLC.  The settlements require the companies to pay restitution totaling $3 million to past and present borrowers who were harmed, impose civil monetary penalties totaling $242,000 on the companies, and require the companies to take affirmative steps to comply with the Federal Trade Commission Act.  The FDIC assessed the largest of the civil money penalties, $151,000, against Bank of Lake Mills.  Each restitution order provides that the bank, but not the institution-affiliated parties, must deposit not less than $3 million into a trust or other segregated deposit account for purposes of providing restitution.

The settlements relate to the following alleged unfair and deceptive practices:

• Charging interest to consumers who paid their loans off within six months, even though the loans had been advertised as interest free for six months;

• Selling add-on products whose terms were not clearly disclosed; and

• Failing to provide consumers an opportunity to exercise their monthly premium payment option for debt cancellation coverage on loans originated by Bank of Lake Mills.

The settlements highlight the FDIC’s broad enforcement authority, including over non-bank institution-affiliated parties, and serve as a useful reminder to Fintech companies and other non-banks doing business with FDIC-supervised banks that the FDIC’s enforcement authority extends to them as well.