Citibank ordered to pay $770 million over credit card.
By Richa Naidu
Citigroup Inc’s consumer bank has been ordered to pay $700 million in relief to borrowers for illegal credit card practices, the U.S. Consumer Financial Protection Bureau said.
The bank will also pay civil penalties of $35 million each to the consumer finance watchdog and the Office of the Comptroller of the Currency.
The $770 million total payout is about 1 percent of Citi’s estimated revenue for 2015, according to Thomson Reuters StarMine.
“Citi is fully reserved to pay costs associated with the agreements,” the bank said in a statement on Tuesday.
The CFPB said that about 7 million customer accounts were affected by Citibank’s “deceptive marketing” practices, which included misrepresenting costs and fees and charging customers for services they did not receive.
The CFPB, set up under the 2010 Dodd-Frank Act aimed at reforming Wall Street practices, said a Citibank unit also “deceptively” charged nearly 1.8 million consumer accounts often unnecessary same-day payment fees while collecting payments.
Citibank misrepresented the charge of $14.95 per account as a “processing” fee and did not explain that the fee was merely to make a faster payment, the CFPB said.
Citi said it had been issuing refunds and had stopped selling products that were part of its agreements with the regulators, including credit monitoring and debt protection products.
The bank said it no longer charged a fee to make same-day payments over the phone.
Citi is not the only big U.S. bank whose credit card practices are under scrutiny.
U.S. authorities, including the CFPB, said earlier this month that JPMorgan Chase & Co would pay $136 million and reform its credit card debt collection practices.
JPMorgan was accused of relying on robo-signing and other discredited methods of going after consumers for debts they may not have owed and for providing inaccurate information to debt buyers.
Citi shares were up 0.5 percent at $59.12 in afternoon trading on the New York Stock Exchange.