By Jonathan Stempel

(Reuters) - First National Bank of Omaha will pay $35.25 million of fines and refunds to settle charges by two U.S. regulators that it duped hundreds of thousands of customers into buying credit card and identity theft services they did not want, understand or receive. It also apologized to customers.

Thursday's settlements with the Omaha-based unit of First National of Nebraska Inc <FINN.PK> were announced by the Consumer Financial Protection Bureau and the Treasury Department's Office of the Comptroller of the Currency.

The CFPB said First National Bank lured customers into buying debt cancellation products meant to ease hardships such as unemployment or big medical bills without making it clear it was an add-on product that cost extra, and then made it hard to obtain or cancel the products.

In addition, the CFPB and the OCC said the bank sold credit monitoring services, "Privacy Guard" and "IdentitySecure," that customers never received.

Regulators said the improper practices occurred between 1997 and 2012. First National Bank of Omaha will pay fines of $4.5 million to the CFPB and $3 million to the OCC, and said it will reimburse $27.75 million to roughly 257,000 customers.

Daniel O'Neill, the bank's president, in a statement said the bank has set aside reserves to cover the settlements, and stopped marketing debt cancellation and credit monitoring products in 2012.

"While the bank did not intentionally mislead our customers, our oversight of the products and the vendor that administered these products was lacking," he said. "To put it into familiar terms, we did not provide our intended customer experience. For this, we provide our sincere apology."

The CFPB said it has taken one dozen enforcement actions to address illegal practices concerning credit card add-ons.

According to its website, First National of Nebraska is the largest privately owned U.S. bank, with $18.8 billion of assets and offices in seven U.S. states.

(Reporting by Jonathan Stempel in New York; Editing by Phil Berlowitz)