Citibank and its subsidiaries have been ordered to pay $700 million in consumer relief for illegal practices related to credit card add-on products and services. According to a consent order issued by the Consumer Financial Protection Bureau (CFPB), about 7 million consumer accounts were affected between 2003 and 2012 by Citibank’s deceptive marketing of five debt protection products and additional add-ons that offered credit monitoring. The illegal practices included:
• Marketing that misrepresented or failed to inform consumers about the cost of the products. Although Citibank told its telemarketers to offer “free” 30-day trials, the bank still charged customers for coverage during that period.
• Falsely claiming the fraud-alert services would notify customers of fraudulent purchases. Instead, the monitoring only provided alerts to changes in customer credit files maintained by major credit-reporting firms.
• Using leading or vague questions to sign customers up for credit card add-ons without specific authorization.
• Enrolling customers in the programs and charging them for the services even though the customers were ineligible for coverage.
I believe that most folks were totally unaware of how bad the conduct of some in Corporate America has been. CFPB Director Richard Cordray had this to say:
We continue to uncover illegal credit card add-on practices that are costing unknowing consumers millions of dollars. In our four years (of existence), this is the tenth action we’ve taken against companies in this space for deceiving consumers.
Citibank said it cooperated with investigations by the CFPB and the U.S. Office of the Comptroller of the Currency and started to take corrective actions to reimburse customers in 2013. Affected customers will automatically receive a statement credit or check, and those no longer with Citi who are eligible will be mailed a check.
The $700 million in customer relief paid by Citibank includes about $479 million for an estimated 4.8 million consumer accounts harmed by the deceptive marketing or retention practices. The bank will also pay about $196 million to the estimated 2.2 million consumer accounts that failed to receive promised credit-monitoring services. Additionally, Citibank will pay $70 million in cumulative penalties to the CFPB and the Office of Comptroller of the Currency and agree to be barred from marketing add-on products to customers until the bank submits a compliance plan to the consumer agency.
A Citibank subsidiary known as Department Stores National Bank will have to provide approximately $23.8 million in relief to nearly 1.8 million consumer accounts for charging expedited payment fees. Citibank said it was fully reserved for costs associated with the payments and had previously disclosed the investigations to investors.
Source: USA Today
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