Citibank fined $700m for “unfair and deceptive” practices

US financial authorities have ordered Citibank to remunerate credit card users it has been found to have deceived

Citibank and its subsidiaries have been fined $700m for practices the Consumer and Financial Protection Bureau said were "unfair and deceptive" 

The Consumer and Financial Protection Bureau is forcing Citibank North America, as well as its subsidiaries, Department Stores National Bank, and Citicorp Credit Services, to repay $700m to customers for what the US regulator describes as “unfair and deceptive practices.” According to a statement posted on the CFPB website, these practices “include unfairly billing consumers for credit card add-on products, deceptively marketing those products, and deceptive collection practices. Citibank has agreed to pay about $700m in refunds on about 8.8 million accounts.”

“Citibank has agreed to pay about $700m in refunds on about 8.8 million accounts”

Regulators found that the bank offered customers a number of debt protection add-on products that pledged to write off, balance or defer the due date of payments for customers in instances of unforeseen hardships, such as job loss, disability, hospitalisation or divorce, as well as anti-fraud card monitoring services. These products were found to be sold deceptively at the point of sale, with customers not informed of their additional costs or misled concerning a supposedly “free” 30 day trial.

The benefits of the anti-fraud monitoring services were also misrepresented. As the CFPB notes in a press release, “Citibank claimed the fraud alert service on credit card accounts would alert them of fraudulent purchases. In fact, the credit-monitoring product only provided alerts to changes in a consumer’s credit file maintained by major reporting companies, not at the transaction level.”

Further, the bank was accused of using misleading questions to obtain billing authorisations from customers to purchase add-ons, as well as using deceptive practices when collecting payment on delinquent credit card accounts, leading customers unnecessarily to pay a $14.95 fee.

Citibank must pay $479m in consumer relief to the 4.8 million customers deemed to have been affected by deceptive marketing or retention practices and $196m to roughly 2.2 million customers who enrolled in the card monitoring service, while Department Stores National Bank must provide $23.8m to the 1.8 million customers that were charged expedited payment fees on delinquent accounts. Finally, the bank must also pay a $35m fine to the CFPB’s Civil Penalty Fund.