The company says (and I believe) the marketing materials the FDIC objects to in this case meet or exceed existing and proposed disclosure regulations. In fact, the Fed's proposed new regulations for card lending practices and disclosure would require the rest of the industry to upgrade its disclosure standards to a level that CompuCredit adopted on its own several years ago. Finally, CompuCredit says its business practices have always been consistent with the "Gold Standard" credit card principles released in August 2007 by Rep.Carolyn Maloney, Chair of the House Subcommittee on Financial Institutions and Consumer Credit.

Our facts so far: Until yesterday, the FDIC told anyone who asked that CompuCredit’s marketing materials were in compliance, and seemed to have so much confidence in the propriety of its business practices that it actually hired the company to go out and solicit companies on its behalf. Not only that, the company’s level of disclosure meets the current requirements of another regulator, the Fed, and the Fed’s proposed stricter standards, as well as Congressional watchdogs.

Are you getting the sense that all this is about something other than consumer protection? My bet is now that the FDIC and FTC have held their little “show” in front of the media (I can’t recall the last time regulators called a press conference to announce an action like this, by the way; even the reporters there seemed baffled), they’ll try to sit down again with CompuCredit and finish negotiating an agreement the two sides have been working on for months. I think the FDIC and FTC are less than eager for this case to actually go to trial, so look for any financial penalty to be nowhere near the $200 million mentioned in the press release headline, and instead something closer to the $7.5 million CompuCredit has already accrued. (In fact the ultimate penalty can’t be anything like $200 million, since any actual consumer losses related to the disputed activity are nowhere near that high.)

Side-by-side comparison

The FDIC’s efforts are politically driven and misguided.  I’ve looked at solicitation materials from CompuCredit and other, larger, credit card companies side-by-side. The two either contain identical language or, when they’re not identical, CompuCredit’s disclosure is clearer.

But to the regulators that doesn’t matter. CompuCredit is a subprime lending specialist, which means it’s a soft, politically acceptable target.

It’s a shame the way the FDIC is operating under Sheila Bair. The industry deserves better!  David Hanna, CompuCredit’s CEO, says he’s not going to cave in to this sort of abuse. Good for Dave; I hope CompuCredit continues to battle, and lets a judge decide, if that’s what it takes.

In the meantime, it would be nice if the regulators got back to reining in activities of banks that really have crossed the line and have created a threat to the Bank Insurance Fund. For some reason, Sheila Bair’s FDIC doesn’t seem interested in doing that, and prefers to grandstand, instead.