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From Banking and Finance Law Daily, December 30, 2013

FDIC assesses civil money penalties

By J. Preston Carter, J.D., LL.M.

The Federal Deposit Insurance Corporation has announced five enforcement actions taken against three banks and one individual. In the stipulated orders, the parties, without admitting or denying any violation of law, agreed to pay civil money penalties (CMPs) pursuant to Section 8 of the Federal Deposit Insurance Act (12 U.S.C. §1818).

Flood Disaster Protection Act. Citizens State Bank of La Crosse, La Crosse, Wisc., agreed to pay a CMP of $7,000 where the FDIC determined that on loans secured by property located in a flood hazard area in which flood insurance has been made available under the National Flood Insurance Act of 1968, the bank failed to:

  • obtain flood insurance on a building securing a designated loan at the time of the origination of two loans;

  • obtain adequate flood insurance at the time of the origination of four loans;

  • provide to borrowers as Notice of Special Flood hazard and Availability of Federal Disaster Relief Assistance when making, increasing, extending, or renewing a loan on six occasions;

  • require the escrow of all premiums and fees for required flood insurance when it required the escrow of taxes, insurance premiums, fees, or any other charges for a loan secured by residential improved real estate for one loan; and

  • follow force placement flood insurance procedures for three loans.

Community State Bank, Saint Charles, Mich., agreed to pay a CMP of $4,770 where the FDIC determined that on loans secured by property located in a flood hazard area in which flood insurance has been made available under the National Flood Insurance Act of 1968, the bank failed to provide to borrowers a Notice of Special Flood Hazard and Availability of Federal Disaster Relief Assistance when making, increasing, extending, or renewing a loan on four occasions.

Federal Trade Commission Act. Glennville Bank, Glennville, Ga., agreed to pay a CMP of $10,000 where the FDIC determined that it engaged in deceptive acts and practices in violation of section 5 of the Federal Trade Commission Act (15 U.S.C. § 45 (a)(1)) in that the bank:

  • failed to disclose adequately that customers had to register to receive all of the listed benefits with respect to the Bank’s identity theft insurance product;

  • failed to disclose adequately that all customers were entitled to reimbursement of certain expenses at no cost, regardless of whether or not they opted out of the identity theft program; and

  • misrepresented to existing customers in the reminder postcard that certain credit file monitoring services were included in the listed benefits when they were not.

Citizens State Bank, Kingsland, Ga., agreed to pay a CMP of $10,000 where the FDIC determined that it engaged in deceptive acts and practices in violation of section 5 of the Federal Trade Commission Act (15 U.S.C. § 45 (a)(1)) in that the bank failed to disclose adequately that:

  • customers had to register to receive all of the listed benefits with respect to the bank’s identity theft insurance product, and

  • all customers were entitled to reimbursement of certain expenses at no cost, regardless of whether or not they opted out of the identity theft program.

Safety and soundness. Daniel Clark Thomas, individually, and as an institution-affiliated party of Farmers Exchange Bank, Louisvlle, Ala., agreed to pay a CMP of $25,000 where the FDIC determined that he engaged in unsafe or unsound banking practices and/or breaches of fiduciary duty, by reason of which:

  • the bank suffered or probably will suffer more than a minimal financial loss or other damage;

  • the interests of the bank’s depositors have been or could be prejudiced and/or Thomas received financial gain or other benefit; and

  • such unsafe or unsound banking practices and/or breaches of fiduciary duty, involved personal dishonesty or demonstrated Thomas’s willful and/or continuing disregard for the safety or soundness of the bank.

Thomas was also prohibited from participating in the affairs of any financial institution without prior written approval of the FDIC and the appropriate federal financial institutions regulatory agency.

Companies: Citizens State Bank, Kingsland, Ga.; Citizens State Bank of La Crosse; Community State Bank, Saint Charles, Mich.; Glennville Bank

MainStory: TopStory BankingOperations DirectorsOfficersEmployers EnforcementActions FloodInsurance UDAAP

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