SARC-2007-04 (May 2, 2008)
The Bank appealed the downgrades of its Compliance Rating and its Community Reinvestment Act (鈥淐RA鈥) Rating assigned to it as a result of the concurrent Compliance Examination and the CRA Evaluation in 2006. The Examiner had determined that the Bank鈥檚 Compliance Management System (鈥淐MS鈥) was seriously deficient because of the absence of adequate and effective oversight, monitoring, and program administration by the Bank鈥檚 Board of Directors and senior management, primarily with respect to affinity contracts with third-parties for the marketing and servicing of subprime credit card products issued by the Bank. The Report of Examination (鈥淩OE鈥) cited numerous instances of credit card practices that violated provisions of consumer protection laws, including the Federal Trade Commission Act (鈥淔TC Act鈥), the Equal Credit Opportunity Act (鈥淓COA鈥), the Truth in Lending Act (鈥淭ILA鈥), and the Fair Credit Reporting Act (鈥淔CRA鈥), among others. The deficiencies in the Bank鈥檚 CMS contributed to the situation by failing to forestall or detect many of the violations.
Bank management disputed the examiner鈥檚 findings as a matter of law, citing, among other things, the interplay between TILA and section 5 of the FTC Act, as well as the fact that its credit card program was in line with widespread industry practice. Further, the Bank argued that the findings were inconsistent with the Bank鈥檚 prior examination history; that its CMS had improved significantly; and that the CRA Rating was a misapplication of the 多宝游戏下载鈥檚 regulations.
The Committee determined that the Bank鈥檚 CMS was weak, monitoring practices ineffective, and training for Bank personnel deficient. The Committee also concluded that solicitations for credit card products were unfair and/or deceptive and that the violations, catalogued in detail in the ROE, were properly cited and documented. Further, the deceptive practices involved a significant number of consumers, and the Bank鈥檚 business was largely influenced by its relationship with a third-party vendor. Finally, the Committee determined that the Bank鈥檚 CRA Rating, as a result of the violations cited in the ROE, was consistent with regulatory requirements.