In an agreement published last week, the Office of the Comptroller of the Currency finds that there are violations in business practices at Urban Trust Bank.
The agreement contends that several aspects of banking practices at Urban Trust were neither safe nor sound.
The problems run across several aspects of how Urban Trust operates. According to the OCC, Urban Trust needs to shore up its vendor management. Going forward, Urban Trust has to put together a business plan (to be approved by the OCC) that will address their concerns over the bank’s products and services. The agreement reads:
“The Comptroller has found violations of law and regulations and unsafe and unsound banking practices relating to vendor management practices and failure to implement an approved business plan, specifically concerning existing and new products and services.”
The OCC says that it wants to protect deposits place in the bank. That is a somewhat mystifying point, as Urban Trust’s regulatory capital ratios are fairly strong. Their tier-one leverage ratio is 13.7 percent and their tier one risked-based capital ratio is 18.7 percent. Both of those scores exceed the definition of well-capitalized by a wide margin. The exception to this level of health could be with respect to their loan-loss reserves, which amount to just 2.96 percent of outstanding loans. Given that Urban Trust is located in Florida, those numbers could be too optimistic.
In my opinion, that would seem to say that the real motivation for this letter is elsewhere – and most likely in the area of their prepaid cards. The FDIC’s interaction with Republic Bank had the same contradiction. Even though Republic had good capital ratios, they had a refund anticipation loan product that worried the FDIC. The FDIC said that both were of concern, even though the grounds was far greater with the product.
Left unsaid are the specific remedies required for the bank’s prepaid debit cards.
Urban Trust still offers an optional overdraft product on Check$mart-branded cards in Ohio and Arizona. Urban Trust levies a penalty fee of 15 percent of the overage, up to a maximum of $36.
The wording “existing and new products and services” would seem to portend that there are new plans at Urban Trust which have not yet been released to the public. What products and services? Was Urban Trust contemplating a new iteration of credit? Could Urban Trust have been interested in a refund anticipation loan product?