OTS Puts More Hurt on MetaBank

A MetaBank 8-K filing says that the OTS may require the Iowa thrift to compensate its former iAdvance customers.

MetaBank says that the OTS is preparing a cease-and-desist order. Their speculation, which has to be fairly substantive if it is released to investors, is that there will be civil money penalties. MetaBank’s message to its investors: expect our legal costs to go up.

The OTS says that those practices violate Section 5 of the Federal Trade Commission Act and the OTS’ rule on Advertising Regulation.  Section 5 covers rules that protect the privacy of consumer’s personal information.

MetaBank says the iAdvance reimbursements are a sure thing.

The OTS directed MetaBank to suspend their iAdvance product last fall on the grounds that it violated rules against unfair and deceptive practices. The iAdvance offered short-term high fee cash advances to customers with a direct deposit-enabled debit card. The program was offered through cards on the NetSpend network. The news initially harmed an IPO by NetSpend. NetSpend canceled their IPO in the wake of the directive. After the smoke cleared, they were able to offer shares.

The market doesn’t seem to have much concern about this filing. MetaBank shares have gained a lot of ground recently. In fact, the shares are up about 15 percent since the announcement. Part of it might be that MetaBank’s P/E is at an-unheard-of 3.75. They still have more than $4 in earnings per share. Of course, there’s a lesson there: you can earn a lot of money, but if it comes with some dirty laundry, then it will still drag you down.