The credit card company was investigated for their marketing techniques.
It's been a rough week for Citibank. The banking company and its subsidiaries were ordered to pay $600 million in consumer relief just this afternoon. The fines will cover illegal practices that were related to credit card add-on products. The order, which was issued by the Consumer Financial Protection Bureau, said that nearly 7 million consumer accounts were affected by the illegal add-ons between 2003 and 2012. The cause? Deceptive marking of debt protection products that offered additional credit monitoring.
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The alleged problems include:
- Marketing that didn't give the full story about the cost of products. Citibank said that the offer was free, but they were still charged during that period.
- Saying that customers would be notified for purchases that were suspect - they were not.
- Using unclear language or programs when charging for services.
- Enrolling customers in programs for which they were not eligible.
"We continue to uncover illegal credit card add-on practices that are costing unknowing consumers millions of dollars," said CFPB Director Richard Cordray, according to USA Today. "In our four years (of existence), this is the tenth action we've taken against companies in this space for deceiving consumers."
Citibank has also said that they cooperated with investigation by the CFPB and the US Office of Controller of the Currency. They have already started taking corrective actions in 2013, and some customers have been reimbursed.
"Citi will continue to notify and refund affected customers," the bank said. "Affected customers will automatically receive a statement credit or check, and those no longer with Citi who are eligible will be mailed a check."
They went on to say: "Citi continually reviews our policies, processes, systems and controls so that all of our products and practices meet or exceed the high standards that both we expect and our customers deserve."
The $700 million includes about $479 for 4.8 million accounts that were harmed by the deceptive marking practices. They will also pay about $196 million to the 2.2 million consumers who failed to get the credit monitoring services.
There is an additional $70 million in penalties to the CFPB and the company has agreed to stop marketing add-on products until they have a compliancy plans.
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Department Stores National Bank must provide about $23.8 million in relief to nearly 1.8 million consumer accounts for charging expedited payment fees. Citibank is prepared to pay and have disclosed everything to the investors.