Credit cards issued by a privately insured credit unionaffiliated with the Illinois Credit Union League received aCFPB fine for violating servicing rules.

According to a consent order published Wednesday, theContinental Finance Company LLC lied to consumers about the cardfees and about whether security deposits made for some of the cardscarried FDIC Insurance. The company also violated the Truth inLending Act by requiring consumers to pay more than 25% in feesduring the account's first year.

Consumer groups opposing abusive credit card practices labeledthe cards “fee harvesting” cards, saying they have low limits and highfees.

According to the consent order, Continental contracted with anunnamed, privately insured credit union for 20 months, from April2012 to December 2013, to issue cards in the credit union's name.During that time, the credit union issued more than 290,000cards.

The relationship between the Naperville, Illinois, ServicesCredit Union and Continental Financial, as well as its leagueaffiliation, first drew attention in 2013 when consumer advocatesincluded the credit union's card on a list of cards advocatesconsidered the most abusive of consumers.

Services Credit Union has no website, but its address and phonenumber are the same as that of the ICUL and it lists Sean Hession,president and CEO of the ICUL as its manager.

Further, in June 2013 when the CU Times asked for an interviewabout the relationship between Services and Continental Financial,the league denied the interview request on the grounds an interviewwould discuss a proprietary and confidential agreement between thecompany and Services.

The Illinois Credit Union League did not immediately comment onthe CFPB's consent order.

According to the consent order, the credit union would issue theContinental cards then immediately turn over all receivables to thecompany for funding and servicing.

“Once the credit union assigned its rights, Continental servicedthe accounts from billing to collections, advanced all funds toconsumers, and received all fees assessed pursuant to theContinental Card cardholder agreements,” the agency wrote in theorder. “As the servicer, Continental was a party to all ContinentalCard cardholder agreements with consumers issued under theagreements between Continental and the credit union.”

Those agreements included language that said consumers couldapply for credit limit increases after their first year with thecard, but would have to pay a $30 fee for every $100 ofincrease. The company denied that it actually chargedconsumers those fees.

The CFPB also said Continental unfairly charged consumers $4.95per month for choosing to receive paper statements but did notoffer any option. The agency also said Continental had takendeposits for some secured cards and told the consumers the FDICwould insure the deposits when it did not. However, the CFPB didacknowledge no consumer lost funds due to the lack of coverage.

The CFPB ordered Continental to repay consumers $2.67 millionand provide an explanation to credit reporting agencies if the cardaffected consumer credit. Continental must also pay the CFPB a fineof $250,000.