Advertiser Disclosure

Citibank’s $700 Million Credit Card Payback Puts Consumers on Notice

Credit Cards
With so many websites offering free financial tools, it can be hard to know whom to trust. At NerdWallet, we spend literally 1,000s of hours researching partner offers and following strict editorial integrity to match you with the perfect choice. We even share how we make money so you can enjoy our expert advice and researched recommendations with total clarity and confidence.
Bank of America vs. Citibank: Head-to-Head Comparison

Consumers should be wary of add-on credit card services like identity protection and debt monitoring, especially when they’re marketed as part of free trial offers.

That’s the message from a top consumer advocate in the wake of news that the federal government ordered Citibank to pay back $700 million to about 7 million customers for what it called illegal and deceptive practices around such add-ons.

“Consumers should understand that credit monitoring, privacy guard-like products are all useless,” said Ed Mierzwinski, director of consumer programs at the U.S. Public Interest Research Group, or USPIRG, in Washington. “If they were worthwhile, they would fly off the shelves. Instead, banks take advantage of the fear of identity theft and mistakes lowering credit scores to dupe people into buying them.”

Citibank card holders were hit with deceptive marketing, billing and administration practices related to services like fraud protection and credit monitoring from at least 2003 to 2012, according to the federal Consumer Financial Protection Bureau.

In some cases, Citibank marketers promoted 30-day free trials, without telling customers that they’d then be charged for the services each month unless they canceled, the bureau said in a statement. Also, some marketing materials were unclear that customers who successfully applied for a card also signed up for the services, which cost from $1 to $12.95 a month.

No answers

“Not one of them will give a straight answer or a refund, and I can not imagine how many other people are being scammed out of money because they never opted into or consented to these options,” says a Wisconsin consumer who complained to the agency about a debt protection service fee discovered on a Best Buy charge card issued by Citibank.

The unwanted debt-protection fee had cost more than $1,400, according to the consumer. Multiple calls to the retailer, bank and debt-protection company provided no answers, the consumer says. “Each company pushes the issue to another company to get the answer.”

The claim appears in the CFPB’s database of consumer complaints, which displays hundreds against Citibank. Some reflect the details laid out in the consent order. The entries that are publicly listed leave out names and other information.

In another complaint, a consumer from Texas recounts discovering a debt-protection fee that hadn’t been approved and says that during a call to dispute the charge, a bank representative couldn’t say why or how that service was added to the customer’s account.

“She tried to explain the benefit of the service, but I was clueless as I have never, nor will I ever, even consider such an option to begin with,” the complaint says.

‘Relief’ provided

In both cases, the accounts were closed and “monetary relief” was provided after the agency sent them to Citibank, according to the database entries.

A Citibank subsidiary also charged a $14.95 fee to about 1.8 million customers who were making late card payments by phone. That fee was for making a same-day payment, but was described as a processing fee, the bureau said, adding that it was never made clear that there were other, free options for making payments.

Citibank said it has “fully cooperated” with the government and has been paying back customers for the marketing practices at issue since 2013.

“Citi previously discontinued sales of the products included in the agreements, which include credit monitoring and debt protection products and wallet protection services, and no longer charges expedited pay-by-phone fees,” the bank said in a statement.

Check or credit

Affected customers will automatically receive a statement credit or check, and eligible customers who are no longer with Citi will be mailed a check, according to the statement.

Citibank is just the latest financial services provider to be taken to task by the federal agency. Richard Cordray, the bureau’s director, indicated that other banks also have been improperly charging customers.

“We continue to uncover illegal credit card add-on practices that are costing unknowing consumers millions of dollars,” Cordray said. “In our four years, this is the tenth action we’ve taken against companies in this space for deceiving consumers. We will remain on the lookout for similar conduct and will address it as we find it.”

$70 million in fines

In addition to the $700 million it agreed to refund consumers, Citibank will pay a $35 million civil penalty to the bureau and another $35 million to the federal Office of the Comptroller of the Currency, a bank regulator within the Treasury Department. In agreeing to the government consent order, Citibank was not required to face any criminal charges.

Citibank already has reimbursed customers for unfair billing related to credit-monitoring products, according to the bureau. Consumers who haven’t yet received refunds will be contacted by Citibank soon and don’t need to do anything to get their money back, the bureau said.

Mierzwinski, of USPIRG, advises consumers to never agree to a “free trial” offer during a telemarketing or other phone call with a bank or card issuer.

If you see what appears to be an unwarranted fee on your credit card, bank or other bills, contact the consumer agency immediately and report it, he said.

Doug Gross is a staff writer covering personal finance for NerdWallet. Email: doug@nerdwallet.com. Twitter @doug_gross 

 


Image via iStock.