FDIC Hits Rhode Island Bank Over Violation — Says It Charged Excessive Fees

FDIC Hits Rhode Island Bank Over Violation — Says It Charged Excessive Fees

The Federal Deposit Insurance Corporation (FDIC) has determined that Independence Bank violated Small Business Administration (SBA) rules and regulations as well as SBA loan program requirements in connection with originating SBA Small Loan Advantage (SLA) loans to borrowers in amounts up to $150,000.

The violations took place over nearly two years.

In April of 2023, GoLocal was first to report:

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Three banking and finance executives in Rhode Island are being charged by the Federal Deposit Insurance Corporation (FDIC) for “recklessly engaging in unsafe or unsound practices,” as it pertained to the issuance of bridge loans.

Robert S. Catanzaro and Danielle Desrosiers —  top executives with Independence Bank in East Greenwich — and finance professional John Ponte are facing nearly a million dollars in restitution and penalties by the FDIC.

According to the FDIC, of the 201 bridge loans referred by Ponte to the bank, 44% defaulted, and the bank was able to charge-off $1.6 million.

Ultimately, SBA suffered an estimated loss of $8.8 million on the guaranteed portion of the loans. READ MORE

 

New FDIC Order

The Bank made repeated representations to consumers that it did not charge any SBA Loan applicants any fees that were not authorized by the SBA on numerous documents provided to all SBA Loan applicants, but that was not true, claims the FDIC.

The FDIC asserts:

The Independence charged fees in connection with its SBA lending program that were prohibited by applicable SBA regulations. Specifically, the Bank charged the following fees in violation of SBA regulations:

a. Packaging fees for packaging services that the Bank did not provide to borrowers;

b. Packaging fees that the Bank charged without maintaining required documentation in its loan files;

c. Packaging fees in amounts over $2,500 without providing the required itemization of the services provided;

d. Packaging fees for activities that were actually loan underwriting; and

e. Closing documentation fees for services that were not performed by attorneys or paralegals and billed on an hourly basis.

“The Bank made express false representations that all fees charged in connection with its SBA lending program were authorized and approved by the SBA and complied with all applicable regulations and requirements for SBA lenders, when in fact it charged prohibited fees. The Bank omitted material information when it engaged in SBA lending without disclosing that it was charging fees that were prohibited by applicable SBA regulations," stated the FDIC.

In November, Independence Bank announced it was suing the FDIC.

The next step, according to the FDIC, is the adjudication before a hearing officer. No date has been scheduled. This latest order was signed by Mark Pearce, Director Division of Depositor and Consumer Protection at the FDIC.

The order does speak to the agency's previous actions against John Ponte.