Secured Credit Card Bank Stops Issuing New Cards
May 10, 2010 - 6:32 PMA small New Jersey bank that specializes in credit cards for people with damaged credit histories has shut down its card program because of regulatory problems.
New Millennium Bank, a three-branch bank based in New Brunswick, said Monday in its first-quarter earnings report that it has temporarily stopped accepting and processing applications and issuing new cards as the result of an agreement with the Federal Deposit Insurance Corp. The bank previously advertised its cards on several credit card Web sites and issued cards nationwide.
"Certain concerns were raised by the bank's regulators regarding its consumer disclosure and compliance program in its credit card programs," New Millennium said in a release.
Exactly what compliance issues are involved was not detailed, and the bank did not respond to requests for further explanation.
The FDIC said it has not issued any formal enforcement action regarding the bank this year, except for a $2,500 fine on March 24 for violations of the Home Mortgage Disclosure Act. The agency does enforce credit card regulations for the banks it oversees, a spokesman said.
New Millennium cards are typically advertised on Web sites that list a range of credit card offers. A survey of those sites found that where New Millennium was listed in the past, a notice now pops up that says the cards are being reviewed, or are currently not available.
The bank's own Web site does not mention credit cards, other than providing access to existing accounts.
New Millennium issued secured credit cards, which require consumers to pay a deposit up front that establishes the card limit - so a deposit of $500 would result in a card with a $500 limit. This type of card is designed to help consumers with blemishes on their credit histories establish better records.
The cards offered in this end of the market have been frequently dubbed "fee harvester" cards for their high fees, particularly application processing fees and annual fees, which in the past often ate up most of the credit limit. These dubious practices earned secured cards a special provision in the federal credit card legislation that took effect in February, which limits fees in the first year to 25 percent of the account's opening credit limit.
New Millennium said it lost $903 million in the first quarter ended March 31, compared with a profit of $71,000 in the year-ago period. The bank did not provide a detailed breakdown of its earnings, or say how much credit cards contributed to its results.
The most recent annual report posted on the bank's Web site is from 2008, when it earned $1.03 million for the year and collected $3.9 million in credit card fee income.
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