The credit card business of Cabela’s, the outdoors superstore, has been in the sights of bank regulators more than once. Now it looks to be out of the woods after receiving an all-clear signal from its main federal watchdog.
The card is an odd duck, using the LIBOR interest rate as a benchmark to adjust its rate on balances. Most variable rate cards use U.S. banks’ prime rate. Less innocuously, some of its fees departed from the industry’s main path as well.
In 2011 the Federal Deposit Insurance Corp. ordered it to pay a $250,000 fine plus $10 million in refunds to cardholders for an array of sharp practices. For example, the card charged over-limit fees after cutting cardholders’ credit limits, and set minimum payments too low for cardholders to avoid over-limit fees.
Then in March 2014 the FDIC took another shot at the card business for what it called “deceptive and unfair acts.” It ordered Cabela’s to pay a $1 million fine plus restitution to cardholders who were hit by interest charges during “0 percent interest” promotions. The order also sent refunds to certain customers who signed up for the card’s “LifeLock” identity protection service. There were 905 refund-eligible consumers who signed up during an 11-week period in 2012 at the store in Fort Worth, Texas.
Now the FDIC has terminated the last of the orders, signaling that Cabela’s has lived up to its end of the bargain. In a Dec. 29 announcement, the bank regulator made public it had ended the March 2014 order. The 2011 order ended earlier this year.
FDIC spokeswoman LaJuan Williams-Young wouldn’t say how much cardholders have received in refunds, nor would representatives of Cabela’s, which has locations in 26 states and three Canadian provinces. Although the company consented to the FDIC orders, it admitted no wrongdoing. Eligible cardholders received refunds as a statement credit, or by check if their account was closed.
The chain’s credit card business is no small fry. The 1.7 million Cabela’s Club Visa cardholders had an average balance of $2,073, according to the company’s 2013 annual report. Collectively, they generated $342 million in interest and fees in 2013, putting Cabela’s among the top-25 card issuers that report their financials to bank regulators.That’s despite a low, 9 percent interest rate on purchases made from Cabela’s, according to the card agreement on file at the U.S. Consumer Financial Protection Bureau. For non-Cabela’s purchases, the rate can go up to a maximum of about 25 percent — slightly higher than the 23 percent average interest rate for retail cards. Late fees go up to $35, but the current card agreement makes no mention of over-limit fees, which most issuers have dropped in the wake of the Credit CARD Act of 2009.
Cabela’s operates its card through a Nebraska bank unit called World’s Foremost Bank, a reference to the chain’s slogan, “World’s Foremost Outfitter.” The company issued a statement by Sean Baker, the bank’s president and CEO, saying it is pleased the FDIC recognized its efforts to comply with the order. “We remain committed to exceeding the expectations of our regulators,” Baker said, “and providing our cardholders with the legendary customer service they expect from Cabela’s.”
Removing costly traps that snare card users is a good start.