U.S. sues CompuCredit over credit card practices

By John Poirier and Diane Bartz

WASHINGTON (Reuters) - U.S. regulators accused telemarketer CompuCredit Corp (CCRT.O: Quote, Profile, Research, Stock Buzz) and two banks on Tuesday of deceiving hundreds of thousands of credit card customers by withholding important details and blindsiding them with fees.

The regulators filed a series of civil and administrative-proceeding charges against CompuCredit, First Bank of Delaware (FBOD.OB: Quote, Profile, Research, Stock Buzz) and South Dakota-based First Bank & Trust, seeking more than $200 million in restitution and civil penalties.

After a joint investigation by one agency that regulates banks and another that enforces consumer fraud and deception rules, the regulators said CompuCredit and the banks engaged in "unfair and deceptive practices" by failing to properly disclose upfront fees and credit limits to consumers with poor credit.

The Federal Deposit Insurance Corporation took enforcement action by filing administrative-proceeding charges against CompuCredit and the two FDIC-regulated banks, which issued credit cards marketed by CompuCredit.

The Federal Trade Commission filed a civil suit against CompuCredit and its debt collection subsidiary Jefferson Capital Systems LLC in a federal court in Atlanta.

Officials said the defendants violated federal disclosure rules under the Truth in Lending Act -- a big issue in Washington these days as the Federal Reserve tries to rewrite the rules to make credit card solicitations and billing disclosures clearer for customers.

CompuCredit denied any wrongdoing and said the federal regulatory moves would have no material impact on its financial condition. The Atlanta-based company provides payday loans, auto financing and credit cards to consumers with low credit scores.

Its shares fell more than 28 percent to close at $6.30 on Nasdaq.