The Consumer Financial Protection Bureau (CFPB) has ordered Citibank to pay $700 million to affected consumers for what it alleges were illegal practices by the company in marketing and selling credit card add-on products and services. In addition, Citibank will pay $35 million to the CFPB’s Civil Penalty Fund and has been assessed an additional $35 million penalty by the Office of the Comptroller of the Currency.
The CFPB alleges that Citibank and its subsidiaries — Department Stores National Bank and Citicorp Credit Services, Inc. — engaged in deceptive marketing, unfair billing and deceptive collection practices from 2003 until 2012, affecting approximately 8.8 million consumer accounts. Specifically, those practices included:
Misrepresentation of coverage costs and fees — telemarketers failed to inform or misrepresented to consumers the costs and fees of products being sold.
Misrepresentation of product benefits — for credit monitoring services, consumers were misled about the product’s fraud alert service and its credit score benefit.
Illegal enrollment practices — telemarketers used illegal practices to enroll consumers in Citicorp Credit Services products and charged them for these products without the proper authorization.
Misrepresentation of eligibility — in some cases, Citibank enrolled consumers in products even though the consumers informed the company they were ineligible for these products.
Charged for benefits not received — banks or bank vendors are required by federal law to obtain a consumer’s authorization before accessing his or her credit information. Citibank did not always obtain this necessary authorization, but billed consumers for credit monitoring and credit report services they were not receiving.
Product benefits not provided — consumers were misled into believing their accounts were being monitored for fraud and identity theft when these services were not being provided, or were only partially provided.
Deceptive collection practices — Citibank provided consumers with the option to pay delinquent accounts by phone but failed to notify consumers of the $14.95 fee associated with making a payment by phone. In addition, the company did not inform consumers of other no-cost payment alternatives.
Citicorp, Citibank’s parent company, said that it is cooperating with regulators and that it no longer sells the products in the CFPB’s complaint. In addition, the company says it has ceased to charge consumers fees for expedited payments by phone. Citicorp said that the affected consumers will receive either a statement credit or a check.
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