Love or hate them, you cannot deny that the Consumer Finance Protection Bureau (CFPB) is doing its job with gusto. The CFPB has taken on multiple large companies and financial institutions, levying heavy fines like the nearly $800 million fine against Bank of America. We can now add Citibank to the growing list.
Citigroup will pay approximately $770 million to settle allegations of misleading practices regarding add-on credit card products and various fees associated with their products. $70 million of the fine is a civil penalty to the CFPB and the Office of the Comptroller of the Currency (OCC). The remaining $700 million is slated for refunds to approximately 7 million affected customers.
The products were sold and marketed by Citibank from 2003-2012 and covered a series of debt protection and credit monitoring products, none of which are still offered by Citibank or its subsidiaries. Complaints were focused on three basic product areas:
- Identity Theft Monitoring – Identity theft protection products were misrepresented in several ways, according to the CFPB. In one case, a marketing campaign implied that a product monitored the customer's credit reports at all three major credit reporting sites (Equifax, Experian, and Transunion), but the product only monitored information provided by a third-party vendor. Errors between the multiple parties involved meant that not all customers received their benefits as expected.
Some customers were told the monitoring service would protect them from fraudulent charges when all it actually did was look for suspicious changes to the purchase pattern. Others were offered products with a free thirty-day trial, yet were charged for the product during the trial period, or signed up for an initial $1 monthly trial offer without being clearly told that they must cancel the service to avoid future charges.
- Credit/Payment Protection – Citibank payment protection products offered protection against a financial calamity, such as job loss, by pushing back payment due dates or cancelling them altogether. Some consumers were signed up even though they would not be eligible for all the benefits that the service provided.
Others signed up for credit protection without realizing that was what they were doing, based on confusing language on the PIN pad. They believed they were acknowledging receipt of information instead of signing up for a new service.
- Payment Programs – Customers were deceived by several Citibank subsidiaries into paying for delinquent accounts over the phone for a $14.95 fee when it was not made clear that consumers could pay their bills in other ways without incurring that convenience fee. Bank employees contacted the customers asking if they wanted to use the service without describing the options.
Those subsidiaries will be paying refunds of $23.8 million to approximately 1.8 million customers affected by the expedited payment service. The remainder of the $700 million is split between roughly $479 million to reimburse consumers for deceptive marketing and/or retention practices (4.8 million consumers) and $196 million to consumers who did not get the credit monitoring services that they were promised.
Consumers who still have Citibank accounts will receive a credit for the refund amounts, while checks will be mailed to those who left Citibank. If you think that you may be affected and that Citibank may not have your most updated address, contact Citigroup to make sure that you receive your refund.
In the CFPB’s four years of existence, Citibank's fine is the tenth Bureau action regarding customer deception. It probably will not be the last. History tells us that there will be plenty more deceptive products and practices to root out. Consumers would do well to remember that if anything, especially a credit product, sounds too good to be true, then it usually is.
If you would like to monitor your credit to prevent identity theft and see your credit reports and scores, check out our credit monitoring service.