October 5, 2010 – Monterey County Bank, Monterey, California, agreed to pay $3 million under a Consent Order with the FDIC for deceptive practices under the Fair Debt Collection Practices Act.
The terms of the settlement were announced in an FDIC Press Release.
The Federal Deposit Insurance Corporation (FDIC) announced a settlement with Monterey County Bank, Monterey, California (MCB), for deceptive practices in violation of Section 5 of the Federal Trade Commission Act and Section 807 of the in connection with solicitations for its program (Balance Transfer Card) and debit card program.
Under the settlement, MCB has agreed to a Consent Order and to pay restitution of approximately $2 million in the form of credits or cash refunds to approximately 15,500 Balance Transfer Card consumers and approximately $250,000 of cash restitution in connection with the debit card program. MCB will pay a civil money penalty of $500,000. MCB will contact those consumers entitled to restitution; affected consumers need not take any action.
MCB is also going to donate $300,000 toward consumer financial education and counseling.
The Balance Transfer Card was marketed to consumers with charged-off consumer debt as an opportunity to pay down old debts and obtain credit cards. The FDIC determined that the solicitations did not disclose information necessary for consumers to make an informed decision. In addition, MCB failed to adequately disclose all fees and charges assessed in connection with its debit card product, which was marketed by a third party through e-mail solicitations and advertisements on various Web sites. In agreeing to the issuance of the consent order, MCB does not admit or deny any liability.
Monterey County Bank is a $300 million asset institution with five branches that operates as a subsidiary of Northern California Bancorp, Inc. The Bank has a rather high troubled asset ratio of 76 compared to a national median of 15 and has shown a loss of $.19 per share for the six months ending June 30, 2010 compared to a profit of $.60 for the prior comparable period. According to the Bank’s web site, Monterey County Bank is the oldest locally owned and managed bank in Monterey County, and has been in business for 33 years.
Monterey County Bank remains adequately capitalized according to the Bank’s latest 10-Q filed with the SEC as of June 30, 2010.
The Bank had a Tier 1 capital to total risk-adjusted assets capital ratio of 13.59% and 12.12% at June 30, 2010 and 2009, respectively. The Bank’s Tier 1 capital exceeds the minimum regulatory requirement by $18,300,000. The Bank had a Total Risk-Based capital to risk-adjusted assets ratio of 14.84% and 13.38% at June 30, 2010 and 2009, respectively. The Bank’s Total Risk-Based capital exceeds the minimum regulatory requirement by $13,000,000.
Monterey County Bank’s 10-Q filing, commenting on the FDIC Consent Order, denied “committing such alleged violations”.
The FDIC has submitted a proposed Consent Order, including proposed monetary payments, related to its 2008 Consumer Compliance Examination, which was completed in 2009. The FDIC has alleged the existence of certain violations of consumer laws and regulations for credit card programs operated by third party vendors. The Bank denies committing such alleged violations and hopes that ongoing negotiations with the FDIC will result in a mutually agreeable resolution to this matter.
Northern California Bancorp’s stock has declined from $18 per share in 2007 to a recent price of $2.50, giving the bank a market capitalization of only $4.5 million.