Citibank is being ordered by a federal regulator to pay about $700 million in refunds to consumers for illegal practices related to credit card add-on products and services.
On the fourth anniversary of its opening, the Consumer Financial Protection Bureau (CFPB) announced that on top of the refunds, Citibank and its subsidiaries will pay $35 million in civil penalties for deceptive marketing, billing and administration of debt protection and credit monitoring add-on products as well as using deceptive tactics to charge extra fees during debt collection calls.
According to the agency Citibank or its service providers marketed a variety of credit card add-on products, like credit and fraud monitoring. The agency found that Citibank or its service providers marketed these products deceptively during telemarketing calls, online enrollment, point-of-sale enrollment at retailers. About 4.8 million consumer accounts were affected by these illegal practices.
The CFPB's order quires that Citibank must provide about $480 million in consumer relief to about 4.8 million accounts as a result of the deceptive marketing or retention practices.
Telemarketers misrepresented or did not inform the consumer about the costs of the products, and misrepresented how the products worked and their benefits. Telemarketers also enrolled some consumers without any billing authorization or enrolled consumers even though they didn't meet eligibility requirements.
For about 13 years, Citibank changed consumers for the services even if they never received them. Citibank must pay about $196 million to about 2.2 million consumers that were enrolled and charged for services that they never received.
When Citibank tried collecting payment on delinquent accounts, the company offered consumers the option to pay by phone using a checking account so that it would post the same day. Representatives, however, didn't explain the $14.95 processing fee was so the payment would post that day and didn't offer other no-cost payment alternatives.
Citibank subsidiary Department Stores National Bank must provide about $23.8 million in consumer relief to almost 1.8 million consumer accounts for charging expedited payment fees on these delinquent accounts.
Additionally, Citibank will make a $35 million penalty payment to the CFPB and end its practice of unfair billing practices.
Citibank will be refunding affected consumers directly.
Read the full text of the CFPB's consent order found here.