On May 11, 2017, the FDIC issued a press release announcing settlements with Bank of Lake Mills, Lake Mills, Wisconsin, and two of its institution-affiliated parties, Freedom Stores, Inc. and Military Credit Services, LLC (MCS), resolving allegations that the lenders violated Section 5 of the Federal Trade Commission (FTC) Act, which prohibits unfair and deceptive practices.
According to the FDIC, the lenders violated federal law by:
- Charging interest to consumers who paid off their loans within six months even though the loans were promoted as interest-free for the first six months;
- Selling add-on products in conjunction with loans originated by the bank without properly disclosing the terms of those products; and
- Failing to provide consumers the opportunity to exercise the monthly premium payment option in conjunction with the purchase of optional debt cancellation coverage on loans originated by the bank.
As part of the settlement, the bank, Freedom Stores, and MCS stipulated to the issuance of respective Orders for Restitution and Orders to Pay Civil Money Penalties (collectively, FDIC Orders).
- Bank of Lake Mills agreed to pay a civil money penalty of $151,000 as part of its settlement.
- Freedom Stores agreed to pay a $54,000 civil money penalty as part of its settlement.
- Military Credit Services agreed to pay a $37,000 civil money penalty as part of its settlement.
The FDIC Orders also require the lenders to pay $3 million in restitution to harmed consumers. The restitution plan covers all past and present borrowers who received loans originated by the bank through Freedom Stores and MCS between 2013 and 2015, and were harmed by the allegedly unfair or deceptive practices. The Orders also require Bank of Lake Mills, Freedom Stores, and MCS to take affirmative steps to ensure compliance with the FTC Act.
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