Citibank Fined $700 Million for Illegal Credit Card Practices

The Consumer Financial Protection Bureau (CFPB) has ordered Citibank and its subsidiaries (Citi) to provide roughly $700 million in relief to consumers harmed by illegal practices related to credit card add-on products and services.

First, the CFPB found that Citi engaged in deceptive marketing practices on several fronts:

  1. Citi misrepresented the cost and fees for certain product coverage by not informing customers about the cost of products;
  2. Citi misrepresented benefits of some products by claiming a fraud alert service would alert consumers of fraudulent purchases, whereas the service, in fact, only provided alerts to changes in a consumer’s credit file;
  3. Citi engaged in illegal practices in the enrollment process by obtaining billing authorizations for products through leading questions and construing ambiguous answers as permission for enrollment; and,
  4. Citi misrepresented information about eligibility for coverage of certain products by failing to inform consumers that they would ineligible to receive product benefits when Citi knew they would be ineligible.

Furthermore, Citi engaged in unfair billing practices by charging customers for benefits they did not receive. Citi would charge consumers for credit monitoring or other benefits even if the customer could not or was ineligible to receive such benefits. Moreover, as a result, Citi failed to provide product benefits to consumers who were expecting such benefits. Finally, Citi engaged in deceptive collection practices. When collecting payments, Citi offered customers the option to pay by phone, so the payment would post to the account the same day. In connection with this payment method was a $14.95 fee; however, Citi failed to explain that this fee was to post payment to the account same day rather than a general processing fee as presented. Citi also failed to provide other no-cost alternatives.

As a result, under the Dodd-Frank Act, CFPB has ordered Citi to provide roughly $700 million in relief to consumers.