FDIC Orders Bank To Pay $1.225 Billion For Alleged Interchange Fee Misclassification

On April 18, the FDIC announced a consent order against a Delaware-based bank alleging that the bank engaged in unsafe and unsound banking practices and violated various federal consumer protection laws, including Section 5 of the FTC Act, the Truth in Lending Act (TILA), and the Servicemembers Civil Relief Act (SCRA).

According to the FDIC, the bank:

• Misclassified millions of consumer credit cards as commercial accounts. The misclassification allegedly lasted for approximately 17 years and caused the accounts to be hit with higher interchange fees.
• Overcharged merchants by more than $1 billion. The higher interchange rates were passed on to merchants using the bank's proprietary network, resulting in substantial overcharges.