The Consumer Financial Protection Bureau (CFPB) has ordered Citigroup to refund $700 million to customers and slapped the institution with $70 million in fines for "illegal and deceptive credit card practices”.
The penalties are the latest in a series of multimillion dollar settlement actions against credit card issuers in the U.S. for selling "add-on" products like "rush" processing and credit score monitoring. Bank of America was fined and ordered to repay customers last year as was JP Morgan Chase in 2013.
Citigroup will give refunds to 8.8 million customers who paid for add-ons and will pay two $35 million fines to federal bank regulators and the CFPB which was created five years ago by the passing of the Dodd-Frank law that made huge changes to the financial industry in the wake of the 2008 financial meltdown.
News of the penalties did not affect Citigroup shares today which rose 27 cents in midday trading on an overall broad market decline.
Richard Cordray, CFPB Director said "We continue to uncover illegal credit card add-on practices that are costing unknowing consumers millions of dollars. This is the tenth action we've taken against companies in this space for deceiving consumers."
Some of Citigroup’s illegal activities dates back to 2000.
CFPB records show that in one case Citigroup telemarketers sold consumers identity theft protection services using a 30 day free trial which did not even exist, and signed up customers for add-ons when it was unclear if the customers had even agreed to the purchase. The organization even sold non existent credit monitoring services and misrepresented consumers by charging an $14.95 "expedited" payment fee when no-fee options were available.
Nick Bourke of Pew Charitable Trusts said "Add-on services, for the most part, provide no benefit to consumers and people should be very careful to sign up for them."
He said although credit card providers have mostly ended the practice, some high-cost installment loan providers or payday lenders still sell the add ons.