FDIC bars Utah banker for life, fines bank for actions

The Federal Deposit Insurance Corp. has slapped a Utah banker and a Utah bank with penalties for separate breaches of federal banking laws.

Randell Silcox, a former loan officer in Salt Lake City, was barred from further work in the banking industry for actions he took that may have damaged MagnetBank and Proficio Bank.

WebBank, an industrial bank, was fined $300,000 and ordered to reimburse annual fees it charges consumers who have one of its credit cards. WebBank also was told to stop informing credit reporting agencies about any defaults on that card.

In a statement, WebBank said it accepted the agency's penalties without admitting any wrongdoing.

"WebBank had already discontinued all of the allegedly improper practices identified by the FDIC ... and WebBank no longer issues cards in connection with the program at issue in the order," Chief Financial Officer Kelly Barnett said in a statement Wednesday.

For his part, Silcox said allegations that he didn't disclose to MagnetBank or Proficio his personal relationships with customers who had applied for loans through him were misunderstandings that led the FDIC to end his banking career.

"They said ... 'We can take you to trial or you can sign a document,' " agreeing to a lifetime ban. "I accepted their 'What do you want to do?' because I don't have enough money to fight the FDIC," Silcox said Wednesday.

FDIC spokesman Greg Hernandez said the agency's policy is not to comment on its orders, adding, "we let them speak for themselves."

The orders against Silcox and WebBank were issued in late December. The agency made them public last week.

Although the FDIC didn't describe Silcox's alleged violations, the agency said MagnetBank and Proficio "have suffered or will probably suffer financial loss or other damage" because of his actions.

Silcox's wrongs demonstrate his "unfitness to serve as a director, officer [or] person participating in the conduct of the affairs" of any financial institution insured by the FDIC, the agency said.

MagnetBank's headquarters were in Salt Lake City when it failed in January 2009. The bank was brought down by construction and land development loans that went bad when Utah's real estate market collapsed.

Proficio, also in Salt Lake City, provides commercial lending and mortgage origination services. CEO Brad Hardy did not return a call for comment Wednesday.

In regard to WebBank, the FDIC instructed it to end its practice of offering new Pearl Card Gold MasterCards to customers whose balances on cards from other issuers had been written off for nonpayment unless the customers are clearly told their old debts can no longer be collected legally by WebBank or any other new issuer.

WebBank, which provides specialized lending, was also told to stop misleading customers about the credit they might be entitled to if consumers have no available credit at the time the card is issued.

The agency described WebBank's Pearl Card as a "balance transfer credit card." Barnett on Wednesday declined to describe its purpose.

Experts say such cards are sometimes marketed as a way for consumers to repair their credit. The cards also can be a way for a bank to turn another bank's credit losses into a profit.

The FDIC did not say what WebBank's intent was. In many cases, however, a bank will purchase a rival bank's credit card losses, often for pennies on the dollar, according to experts.

The bank may then contact the rival's cardholders to offer them a new card. If a consumer accepts, the bank will restore his unpaid balance to the new card. If the debt is paid, the consumer's credit limit may increase from near-zero, and the card issuer makes a profit. If the debt isn't paid, the bank's loss is usually small.

pbeebe@sltrib.com