WILMINGTON – The Bancorp, which has had to deal with a series of regulatory concerns about its compliance programs over the past seven years, announced May 18 that the Federal Deposit Insurance Corp. (FDIC) has terminated a June 2014 consent order related to the bank's Bank Secrecy Act/Anti-Money Laundering and Sanctions program. As a result of the termination of the consent order, any restrictions related to growth or expansionary activities within the $5.5 billion-asset company’s payments businesses are immediately removed, the company said in a press release with the subhead “Industry Leading Compliance Program Contributes to Consent Order Termination.” The company declined to respond to several questions from the Delaware Business Times regarding changes to its compliance program, its plans for future growth with the FDIC restrictions now lifted and how it viewed its approach to compliance. In a short statement, a Bancorp spokesperson responded, “While we would love to provide you with insights, at this time we are unable to commit the time needed due to other business initiatives.” In its May 18 press release, The Bancorp said it has made “significant investments” in its anti-money laundering (AML) compliance management system, with a focus on technology, staffing and processes. The termination of the consent order comes after The Bancorp disclosed in late December 2019 that it had been fined $7.5 million by the FDIC for a “history of unfair and deceptive practices” around fee assessments, reducing fourth-quarter 2019 earnings by 72%. As it has in the past, Bancorp Bank consented to the issuance of an Order to Pay Civil Money Penalty without “admitting or denying any violations.” The FDIC’s Order to Pay said the $7.5 million fine was appropriate based on the “financial resources and good faith of the bank, the gravity of the violations by the bank, and the history of previous violations by the bank.” The company also didn’t respond to questions from DBT regarding that order in early January. The Bancorp is one of the nation’s leading issuers of prepaid cards and automated clearinghouse (ACH) originations and processes more than 1.1 billion merchant card transactions per year, but it also has an extended history of issues with its primary regulator. The Bancorp and its main subsidiary, Bancorp Bank, has had to deal with a series of allegations of “unfair and deceptive practices” in violation of Section 5 of the Federal Trade Commission Act.

• August 2012: The FDIC said The Bancorp Bank and Higher One (an institution-affiliated party) were charging student account holders for multiple nonsufficient fund (NSF) fees from a single merchant transaction; allowing these accounts to remain in overdrawn status over long periods of time, thus allowing NSF fees to continue accruing; and collecting the fees from subsequent deposits to the students’ account, typically funds for tuition and other college expenses. The two agreed to pay restitution of about $11 million to about 60,000 students and pay civil penalties of $110,000 for Higher One and $172,000 for The Bancorp Bank.
• June 2014: The 2014 order that was just lifted required the company to revise its program and implement more policies and procedures for suspicious activity monitoring and reporting. The company reviewed past account activity to determine whether suspicious activity was properly identified and reported. It also had to establish an independent testing program.
• December 2015: The FDIC determined that the bank failed to provide promised protections to prepaid-card consumers in the resolution of account errors; failed to provide promised benefits for a third-party debit-card rewards program; and charged deceptive debit-decline fees on a general purpose reloadable prepaid card. The Bancorp Bank had to pay a civil money penalty of $3 million and an estimated $1.3 million in restitution to about 21,000 customers.
• March 2018: The FDIC found that the bank violated the Electronic Funds Transfer Act, the Truth in Savings Act, and the Electronic Signatures in Global and National Commerce Act. The FDIC required the bank to pay restitution of nearly $1.3 million to about 243,000 prepaid-card consumers who were assessed transaction fees exceeding what the bank disclosed and was also required to pay a civil money penalty of $2 million.

Bankers outside of The Bancorp and stock analysts contacted back in January about the year-end fine said that banks that fall under enforcement actions often find it difficult to get past that with the regulator. Investors of the public company were won over by the FDIC action, however, as it led to a boost in share price, increasing more than 50% from its May 15 close to its $8.57 a share price at close Wednesday.

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By Peter Osborne Posborne@delawarebusinesstimes.com