Citizens Bank to Pay $11 million in Customer Refunds and $20.5 Million in Fines for Banking Inaccuracies

Citizens Bank to Pay $11 million in Customer Refunds and $20.5 Million in Fines for Banking Inaccuracies
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August 13, 2015

Citizens Bank will be responsible for paying $11 million in customer refunds and $20.5 in civil penalties to three federal regulators for failing to credit consumers the full amounts of their deposited funds.

The Consumer Financial Protection Bureau (CFPB), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) took action against the bank after an investigation revealed that during a five-year span the bank kept money from deposit discrepancies when receipts did not match the actual money transferred.

While some benefitted from the practice, most lost out and customers were shorted millions of dollars.

Citizens Bank, Citizens Financial Group and Citizens Bank of Pennsylvania generally required its customers to fill out a slip listing the checks or cash being deposited, and their total. The deposit slip was given to the bank and the customer got a receipt reflecting the amount on that deposit slip. The deposit slip was scanned and items deposited at a central location.

The bank credited the customer's account with what was read on the deposit slip, not the actual sum of money the customer deposited. Oftentimes when there was a discrepancy between the amounts on the slip, the amount scanned, or the amount deposited, the bank only investigated if the difference was $50 or more. Between 2012 and 2013 it only investigated if the difference was $25 or more.

The banks falsely claimed that it would verify deposits, implying that each deposited would be subject to scrutiny, but the investigation found that in practice, the bank did not check for mistakes and only corrected deposit inaccuracies if they were above the stated threshold.

Citizens Bank must pay $11 million to customers who did not receive all the money that should have been deposited into their accounts and must include any fees the consumer incurred related to the under-crediting. This includes overdraft fees, insufficient funds fees, and monthly maintenance fees. The bank must also include a reasonable estimate of interest on these amounts.

Customers won't have to apply for a portion of the settlement. If customers have an open account with the bank, they will receive a credit. For closed accounts, Citizens Bank will send a check. The bank is also ordered to pay a $7.5 million fine to the CFPB, a $3 million fine to the FDIC, and a $10 million fine to the OCC.

On top of the monetary judgements, Citizens Bank is prohibited from engaging in violations of unfair, deceptive, and abusive acts or practices in connection with deposit transactions. Among other things, this means the bank must properly review its compliance management system to ensure no further violations relating to its processing of deposits, it must not misrepresent its processing practices, and it must incorporate corrective actions if the bank fails to process deposits consistent with federal consumer financial law. The CFPB says the bank has made a significant technology investment over the past year to address the issue.

A copy of the CFPB consent order is available at: