Citibank has agreed to pay $700 million to consumers, plus an additional $70 million in fines, for illegal and deceptive credit card practices, regulators said on Tuesday.
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Out of the $700 million in penalty, Citibank must provide about $479 million in consumer relief to about 4.8 million consumer accounts as a result of the deceptive marketing or retention practices.
The Consumer Financial Protection Bureau (CFPB) celebrated its fourth birthday on July 21.
The Consumer Financial Protection Bureau said Tuesday that Citi will have to issue refunds to 8.8 million affected consumers who paid for credit card add-on products and services, like credit score monitoring or “rush” processing of payments.
The settlement comes on the five-year anniversary of the creation of the CFPB, which came into existence through the passage of the Dodd-Frank law that overhauled the financial industry following the 2008 financial crisis. Citigroup said it’s fully reserved for the costs associated with the agreement. This is the tenth action weve taken against companies in this space for deceiving consumers.. In one case, they said, Citigroup sold consumers credit card monitoring services when the bank wasn’t performing such services.
The bureau says that Citibank misrepresented fees, overstated benefits and misled customers in telemarketing calls.
New York-based Citibank, and its subsidiaries Department Stores National Bank (DSNB), and Citicorp Credit Services Inc (USA), marketed or offered credit card add-on products to consumers nationwide.
“It seems like every time I go home to Texas and spend time with people across our district, I hear stories about community banks having to choose between closing their doors or consolidating into larger institutions to handle the increase in compliance costs”, Ratcliffe continued.
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Other illegal practices include “using leading or vague questions to sign customers up for credit card add-ons without specific authorization” and “enrolling customers in the programs and charging them for the services even though the customers were ineligible for coverage”, writes Kevin McCoy for USA Today. If the customer no longer has an account at Citi, a check will be mailed, the bank said. A spokeswoman for Citi said [AP report] the financial group has already set aside money for the settlement and fines.
