Citigroup's consumer bank has been fined to pay $700milion for its illegal credit card practices. The US Consumer Financial Protection Bureau (CFPB) has observed that Citibank's seven million customer accounts have been charged with misrepresenting costs fees. The consumer finance watchdog has also said that customers were charged for services not rendered to them. CFPB further notes that customers were affected by Citibank's deceptive marketing practices.
Citibank also charged 1.8 million consumers often unnecessary same-day payment fees, while collecting payments, said a statement from CFPB.
Citibank will also pay civil penalties to the tune of $35 million each to CFPB and Office of the Comptroller of the Currency. The total settlement amount is estimated to be one percent of the bank's revenues for 2015, according to Thomson Reuters StarMine. Citi paid over $17 million in forms of fines and settlements since the financial crisis till 21 May, 2015.
Citibank said in a statement that "Citi is fully reserved for costs associated with the agreements. it had cooperated with the regulators in the probe."
CFPB's statement further reads that the bank broke the law by deceitfully selling add-on products to some of its credit card customers. "Some of these sales practices included misrepresenting the costs of such offerings and charging for services that customers ultimately didn't receive," reads the statement.
Citibank's offered products included debt protection, credit monitoring, among others. CPFB further said that customers need not take action on their own to get their refund. The affected customers have been or will be contacted by the bank. Citibank's credit card holders may also call the bank to know more details about the compensation.
CFPB Director Richard Cordray said in a statement that this settlement was the consumer watchdog's tenth such case. The other major banks that have been fined for credit card illegal practices were JPMorgan Chase & Co and Bank of America Corp.
CFPB earlier this month said that JPMorgan Chase would pay $136 million and was ordered to reform its credit card debt collection practices. JPMorgan was fined for its robo-signing and other discredited methods of chasing customers for debt repayment that they actually didn't owe to the bank.
With an objective of reforming Wall Street practices, CFPB has been set up under 2010 Dodd-Frank Act. The tough enforcement of CFPB has been boosting the consumer confidence in the US banking sector.
Banking sector analysts say that CFPB is just marching through the industry as it loves to make big numbers like this resulting in largest percentage of fine going back to customers.
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