The Federal Deposit Insurance Corp. issued a consent order against Teaneck, N.J.-based Cross River Bank for unsound banking practices and violation of several federal laws, including the Truth in Lending Act and the Electronic Fund Transfer Act.
In an investigation, the FDIC found that since June 26, 2013, Cross River Bank has offered two unsecured consumer loan products through an agreement with San Mateo, Calif.-based Freedom Financial Asset Management LLC. These products, however, were misrepresented and certain information about the services, including benefits, features and agreement terms, were omitted. Customers were also required to pay their loans through preauthorized electronic fund transfers. Freedom Financial enrolled all customers in preauthorized EFTs at loan origination.
According to the FDIC, the bank failed to provide enough oversight of its third-party providers and did not develop an efficient compliance management system that will protect its customers. The bank also failed to conduct a comprehensive due diligence before entering in a transaction with the third-party.
In line with this, the FDIC ordered the bank to cease and desist from engaging in unsafe banking practices, correct its violations, and improve its compliance management system and board oversight. Cross River Bank and Freedom Financial were also ordered to submit a restitution plan to be paid to eligible customers. The bank will also pay $641,750 in civil monetary penalty.
The bank has consented to the orders, without admitting or denying any of the charges.
Cross River Bank is a unit of CRB Group Inc.