WASHINGTON — One of the largest prepaid card issuers, The Bancorp Bank, has agreed to pay $2 million to a federal regulator to settle allegations that the bank charged higher fees than what was disclosed to customers.
The Bancorp Bank, based in based in Wlimington, Del., typically holds deposits while partnering with fintech firms and other financial companies to offer special online accounts, such as prepaid cards and small business mobile accounts.
On Wednesday, the Federal Deposit Insurance Corp. issued an order that said The Bancorp Bank charged higher fees on prepaid cards than it had represented to users for nearly four years, resulting in a $2 million penalty.
The Bancorp Bank agreed to pay the penalty without admitting or denying wrongdoing.
The bank now has 30 days to submit a restitution plan to the FDIC outlining how it will reimburse cardholders who were charged higher transaction fees from Dec. 3, 2010, through Nov. 8, 2014. If the FDIC does not object to the plan, the bank has 90 days to reimburse affected customers.
The bank must also hire an independent auditor to monitor how the bank implements its restitution process and the FDIC’s regional director has “unrestricted access” to the auditor’s work, the FDIC order said.
A bank representative did not return requests for comment.
The bank’s parent company, The Bancorp Inc., recently reported $53.4 million in revenue from prepaid card fees last year, up nearly 4% from the previous year. Income from prepaid card fees for the fourth quarter jumped 17.5% to $14.1 million compared to a year earlier.