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Citibank to Pay $700 Million

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Citibank

Citibank to Pay $700 Million

July 22 2015, 07.35am GMT

STOCK.com

The Consumer Financial Protection Bureau (CFPB) has ordered Citibank to compensate consumers to the tune of $700 million in relief for what the Bureau describes as Illegal Card Practices.

A news release from the CFPB says millions of consumers were harmed by the bank’s deceptive marketing and unfair billing of credit card add-on products and services as well as other unlawful practices.

Approximately 7 million consumers were negatively affected by the illegal practices carried out by Citibank. According to the CFPB a Citibank subsidiary also deceptively charged expedited payment fees to nearly 1.8 million accounts during collection calls.

In addition to the consumer relief Citibank has been ordered to pay to consumers, the bank and its subsidiaries will also have to pay $35 million in civil money penalties to the CFPB.

“We continue to uncover illegal credit card add-on practices that are costing unknowing consumers millions of dollars,” said CFPB Director Richard Cordray. “In our four years, this is the tenth action we've taken against companies in this space for deceiving consumers. We will remain on the lookout for similar conduct and will address it as we find it.”

The order against Citibank comes as a result of the bank's alleged marketing and billing tactics for the period 2000 to 2013 which included credit card add-on products including credit monitoring and debt-protection services. According to the CFPB, some clients were deceptively enrolled while at the same time, some of the promised services were not delivered.

Amongst the specific charges leveled against Citibank was the misrepresentation of costs and fees for coverage. In certain instances, telemarketers misrepresented or did not inform clients about the actual cost of products. The lender instructed telemarketers to claim a blanket “free” thirty day trial period yet still charged customers during the initial 30 day membership.

Citibank has to pay $479 million in consumer relief to about 4.8 million customers as a result of deceptive marketing or retention practices. Approximately $196 million must be paid to about 2.2 million customers that enrolled in the credit monitoring services that were never delivered. Also, Department Stores National Bank must provide about  $23.8 million in relief for almost 1.8 million customers for charging expedited payment fees on delinquent accounts.

Shares of the parent firm Citigroup (C, +.42%) closed up 0.42% at $59.10 on Tuesday.

MT4 Chart: Citibank

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