MetaBank Reports Cost of OTS Order
MetaBank says that the Office of Thrift Supervision’s cease and desist order against the Iowa thrift resulted in an after-tax loss of $3.4 million. MetaBank was cited for a number of significant legal problems. The OTS said that MetaBank had engaged in unfair and deceptive practices in its i-advance credit program. The i-advance offered credit to holders of certain MetaBank-issued debit cards. When consumers established a direct deposit on their debit card, they were able to add the i-advance. The i-advance charges $2.50 for each $20 loan increment. The advances had a term of no more than 35 days. The civil money penalty is part of a package of terms to the agreement between MetaBank and the OTS that was announced on July 15th. There terms state that:
- The bank will cease to do anything that would violate the law or the regulations outlined in the OTS’ April report.
- The bank will provide $4.8 million in restitution for i-advance consumers.
- The bank cannot offer an i-advance product with OTS approval.
- The bank cannot originate refund anticipation loans or refund anticipation checks with OTS approval.
- The bank cannot enter into third-party relationships to do either a credit-on-debit product, a RAL or RAC, or a new debit card with OTS approval.
- The bank has to submit a report to the OTS about its third party relationships. If they cannot demonstrate that they are satisfactory to the OTS, then the OTS may require that they are terminated.
- Neither the bank nor its third-party partners can use advertising to deceive the public.
- No golden parachutes until the bank has cleared things up with the OTS.
- The bank needs the approval (the “non-objection”) of the OTS Regional Director in order to issue dividends, pay interest on outstanding debt, or buy back stock.
Shares in MetaBank are up slightly today, which may reflect the coat-tails of the larger market or a positive judgement from investors. Sometimes the announcement of a civil money penalty becomes the basis for a gain, because the penalty amount may be lower than the price that investors had written in to the existing valuation. Some of these terms are not very significant, but others will be painful. The ability to receive a dividend was one of the best reasons to own MetaBank shares. The shares had been paying 52 cents each, which amounted to slightly less than 3 percent at today’s price. For now, the dividend is probably safe. The OTS has taken the option of holding back a dividend, but they have not promised to do so. A more important issue is the opportunity for MetaBank to establish relationships with new sales organizations for prepaid debit cards. Meta has to satisfy the OTS before it can get new debit card business. This would seem to be the stick that gets MetaBank to move. MetaBank has a significant relationship with AccountNow and with NetSpend, but the latter is trying to branch out beyond MetaBank and recently announced plans to do more with Bancorp Bank.
There are some good opportunities for growth in the prepaid sector. The Mango Card is issued by Horizon Bank and by Inter National Bank. As Mango grows, it would become an attractive partner for a debit card issuer.
Stephanie
August 30, 2011
Any word on how or when the “$4.8 million in restitution for i-advance consumers” would be handled?
Is there a time limit for them to provide the restitution? It’s seeming impossible to find out information, especially since the OTS no longer exists.
sdoggie
September 7, 2011
Stephanie –
That is a great question. Let me see if I can ask around.
Adam
Stephanie
September 7, 2011
Thanks Adam! Hope you have some luck finding something.
I emailed Lisa Binder who is the VP of investor relations at metabank to see if I could get any information. Her reply was “Information will be provided when restitution is completed. There is no specific timeline for this announcement. Thank you,” which doesn’t say much of anything.
sdoggie
September 8, 2011
Are you a person waiting on a part of the settlement?
Stephanie
September 8, 2011
I would be I suppose since I was an iadvance customer. However no details have come out regarding what the requirements would be to be one of the people who receives the settlement.
I’ve read through the filings as well as a layperson can but it seems to never be mentioned.
Stephanie
September 8, 2011
I found that they did have a deadline to provide the information. By 7/15, they were to submit the remuneration plan, which according to the filing they did send and was accepted.
By 8/31, they were to submit the list of borrowers who would receive restitution and the amount each borrower would receive. It does not mention the timetable for them to actually pay, I assume it may be stated in the remuneration plan.
So since it is now 6 business days after the 8/31 deadline, the list of who and how much should exist and I would hope the when as well. But how to find out?
http://www.ots.treas.gov/_files/enforcement/97744.pdf
Stephanie
September 15, 2011
Hi Adam,
Any luck on finding anything?
Jamie
September 20, 2011
I was just told by IAdvance customer service that letters will go out to cutomers who are owed restitution no later than Oct 15th 2011.
sdoggie
September 23, 2011
Great reporting, Jamie.
Do you know how they will be alloting the payments to former customers? Is there a particular apportionment for the restitution?
Jamie
October 4, 2011
I also received an email from Metabank that states that only certain customers will get restitution payments. Customer service refuses to tell me if I will get restitution payment. I requested the list of borrowers that will receive restitution. I requested this list pursuant to Freedom of Information Act. I even made clear to OCC that all customers names including their payment can be black out and I just want the page that has my name. My request is still in the assigned to be process stage. Metabanks email address is iadvance@metapay.com.
Jamie
October 11, 2011
You may call Iadvance tommorrow to find out if you going to be receiving a payment. Only 14000 customers has been selected to receive restitution payments.
so626
October 12, 2011
they just sent me a email stating I was getting a refund how real is this
Deenz
October 12, 2011
I was also a customer and used them extensively for 3.5 years. I just received a deposit in my account today for quite a bit of money… so keep your eyes peeled!!!!!
hayter23
October 12, 2011
I received my refund via direct deposit today. I also got an email explaining that it was a refund from my iAdvance account. The email stated that they were sending the refund to my card account, but if you don't have the card anymore, they will mail a check to the last address they had on your account. I didn't even know about the possibility of a refund, so it was quite a nice surprise!!!
hayter23
October 12, 2011
I received my refund via direct deposit this morning. Here is the email they sent me:
Dear iAdvance customer,
MetaBank is adding funds to your prepaid card account ending in **** in the amount of $****.**. This amount is intended to fully satisfy the payment owed to you pursuant to an order issued by the Bank’s regulator, the Office of Thrift Supervision, on July 15, 2011.
If we determine that the above-referenced prepaid card account is no longer active, we will send your payment to you by check at the last known address we have for you in our records.
If you have any questions about this deposit to your prepaid card, please call our toll free customer service number 866-751-2931.
Thank you.
MetaBank
cakes0329
October 12, 2011
I received an email earlier that i was getting a refund and the amount that i would be receiving. I tried calling the IAdvance and there is a recording of the fair practice and if you want to speak to a customer service rep to hold on. No one comes to the phone and then the call drops.
cakes0329
October 13, 2011
i just got this email
Dear iAdvance customer,
MetaBank will be mailing you a check shortly in the amount of $xxxxx. This amount is intended to fully satisfy the payment owed to you pursuant to an order issued by the Bank’s regulator, the Office of Thrift Supervision, on July 15, 2011.
If you have any questions about this notice of the check, please call our toll free customer service number 866-751-2931.
Thank you.
MetaBank
Jamie
October 14, 2011
Congrats to all that received payments. I wasn’t one of the former customers to receive payment and I was a frequent user of the service.
jose
October 25, 2011
well i got the same email on octover 12.2011 i called to make sure if it was true an rep said yes that i would ecpect it on mial in 10 to 15 bussines days it been 13 days an nothing i will wait 2 more days an i will calll them back,,
jonicochran
December 29, 2011
I received the email unfortunately my account now card was closed and they had to mail me a check. I had a name change and address so they told me to fax my updated information. I had to fax the info 6 times my first fax was sent 11/01/11. Im still waiting !!!!!!!!