Santander Bank has confirmed to the Business Journal that it charged some credit card customers a higher interest rate than they agreed to, a misstep that could potentially trigger punishment by regulators.
Because of those overcharges, the Boston-based institution took the drastic step suspending its issuance of new credit cards to customers. No new cards have been issued since March, according to a Santander spokeswoman. The company is a subsidiary of Spanish banking giant Santander Group.
In a statement to the Business Journal, Santander said it recently identified “some minor errors related to credit card interest calculations and disclosures.” The overcharges have affected “a small percentage of our credit card customers,” according to the statement.
The spokeswoman declined to comment on why or how the interest had been miscalculated. The bank is in the process of correcting the issue, according to the statement.
“Because Santander is committed to responsible banking and treating our customers fairly, we believe it is appropriate to temporarily suspend offering new credit cards while these issues are being addressed,” the bank said in its statement. “We continue to service our existing customers without interruption and will resume our credit card offerings as soon as possible.”
Customers who visit Santander’s website to apply for a credit card see a message that says: “Thank you for your interest in Santander Credit Cards. We are not taking applications at this time and apologize for the inconvenience.” There is no mention of the interest miscalculations.
The overcharges could draw legal action from banking regulators. The spokeswoman declined to comment on any discussion with government officials about the problem.
The miscalculations are a setback for a bank that's worked hard to get back in the good graces of regulators and consumers. Several years ago, the bank was hit with a series of regulatory actions, including a $6 million penalty in 2015 for billing customers for credit monitoring they never received, a $10 million fine in 2016 for deceptively marketing an overdraft service, and poor marks from the Office of the Comptroller of the Currency in 2017 for its servicing of low- and moderate-income neighborhoods.
In the past year or two, the bank has made improvements on the compliance front under Santander U.S. CEO Scott Powell. In 2018, it improved its community lending rating and freed itself from Federal Reserve restrictionsthat required the bank to get the government’s OK when hiring senior executives. It also improved its ranking in J.D. Power’s retail customer satisfaction survey after five consecutive years as the lowest-rated bank in New England.
Credit cards make up a relatively small part of Santander’s business. At the end of 2018, the bank had about $347 million due from customers on its credit card accounts, or less than 1 percent of its total outstanding loans, according to Federal Deposit Insurance Corp. data. By comparison, credit cards are responsible for more than 10 percent of the total outstanding loans at Bank of America, a much larger institution.
Still, the products have played a role in Powell’s efforts to improve the bank’s performance since coming aboard in 2015. Two years ago, the bank launched the Ultimate Cash Back Credit Card, which it billed as the first consumer card to offer unlimited 1.5 percent cash back rewards on all purchases with no annual or transaction fees.
This article originally appeared in the Boston Business Journal.