Urban Trust Shutters Overdraft for Prepaid Cards (Feb. 5, 2012)
Feb. 5, 2012
As of Feb. 1, Urban Trust Bank (UTB), a federally chartered community bank, is no longer offering overdraft protection on its Visa Prepaid Debit Cards. The decision comes after a “careful and thorough evaluation of the prepaid cards’ features in an effort to streamline the cards’ offerings and to best serve the needs of UTB’s constituencies,” according to the bank.
In September of last year, the OCC issued an enforcement action against the Florida-based bank over what the agency described as “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.” In a formal agreement, the OCC required the bank’s board to, among other things, prepare a written analysis of its prepaid debit card program to assesses the risks and benefits of the line of business.
While the agreement didn’t mention a third party by name, UTB and partner CheckSmart, a check casher and payday lender, had come under scrutiny from critics who claimed their prepaid cards enabled cardholders to take out what were described as illegal payday loans in Arizona, Ohio and other states where CheckSmart could not make payday loans directly. The program charged an overdraft fee of $15 per $100 negative balance.