On January 4, 2011, Meta Financial Group, Inc. (NASDAQ: CASH) filed an 8K disclosing that the Office of Thrift Supervision (OTS) recently notified Meta (and it’s banking subsidiary, MetaBank) that it may face civil penalties based on the iAdvance product. Further, Meta may be required to reimburse iAdvance customers to some extent to be determined.
The OTS letter comes on the heels of a prior OTS investigation in which the OTS determined that MetaBank engaged in unfair or deceptive acts or practices in violation of the Federal Trade Commission Act and the OTS Advertising Regulation based on the bank’s operation of the iAdvance line of credit program. The iAdvance line of credit program was a popular feature of many prepaid card programs until it was terminated by the OTS.
In the most recent communication from the OTS, Meta Financial Group and MetaBank were notified that the OTS:
- is presently preparing a Cease and Desist Order for presentation to each of the Company and the Bank,
- will require the Bank to reimburse iAdvance customers in an amount to be determined, and
- is currently considering the need to assess civil money penalties against the Bank.
In their 8-K filing, Meta Financial Group discussed the impact as follows:
As previously disclosed, the Company and the Bank have been cooperating with the OTS to correct those aspects of our operations that have been determined by OTS to be deficient, and believe we have made substantial progress to date. While the Company and the Bank do not know the scope of these enforcement actions, the amounts of reimbursement that will be sought by the OTS, or whether any civil money penalties will be ultimately imposed, the Company and the Bank expect to discuss the terms of the Cease and Desist Order as well as the reimbursement with the OTS prior to OTS final determinations. With respect to these future OTS actions, we cannot predict responses by our customers or program managers or whether there will be a material effect on our results of operations or financial condition, although it is expected that legal and compliance costs of the Company and the Bank will increase.