The credit-card bank operated by outdoor retailer Cabela's has been fined $1 million by banking regulators and ordered to pay cardholders restitution for “deceptive and unfair acts.”
The Federal Deposit Insurance Corp. said in an enforcement order posted to its website Friday that Lincoln-based World's Foremost Bank agreed to the sanctions without admitting or denying violations. The bank is the credit-card arm of Sidney, Neb.-based Cabela's, which sells via the Internet and operates 53 stores in the United States.
The bank's practices, the FDIC said, require it to refund certain interest charges to cardholders and to repay others for add-on services purchased in relation to their credit cards, such as identity-theft protection. The amount of restitution wasn't specified in the FDIC order.
“We at World's Foremost Bank recognize we are operating in a dynamic and evolving regulatory environment and it is our responsibility to meet these expectations,” said a statement from Sean Baker, World's Foremost's chief executive. “As such, we immediately addressed the FDIC's concerns and remain committed to providing legendary customer service to our cardholders, as we have throughout our history.”
The fine is the bank's second sizable one in four years. The $1 million penalty and restitution order follow a 2010 agreement in which the bank agreed to pay $10.1 million in restitution and a $250,000 FDIC levy to settle other complaints of unfair and deceptive practices. World's Foremost has about 4 million outstanding credit-card loans, according to Cabela's latest annual filing with the Securities and Exchange Commission.
The Cabela's Club Visa can be used at any establishment that accepts Visa cards.
“The FDIC considered the matter and determined that the bank has engaged in deceptive and unfair acts and practices in connection with marketing, promotion and administration of its consumer credit cards and related add-on products,” the agency said in its enforcement order.
The credit-card unit of Cabela's, the parent company that had 2013 sales of $3.6 billion and profit of $224 million, was ordered to pay restitution to include:
» Refunds of all interest paid before the end of the 12-month interest-free period for cardholders who participated in zero-percent interest promotions.
» Refunds of the premiums paid for LifeLock identity-theft protection by the 905 cardholders enrolled at the Fort Worth, Texas, Cabela's store between Oct. 3, 2012, and Dec. 17, 2012. The bank is also required to tell certain other customers enrolled in LifeLock that it is not a requirement for having a Cabela's Club Visa card.
» Provide points redeemable for merchandise to cardholders whose credit-card bills were paid by Payment Assurance, an insurance-like plan that paid outstanding amounts when the customer was not able to.
World's Foremost has assets of $4.1 billion and had net income last year of $47.6 million. Shares of publicly traded Cabela's have fallen about 1.8 percent in the past year. Cabela's said this week that first-quarter profit fell by almost half, on weaker gun and ammunition sales, to $25.7 million.