The Consumer Financial Protection Bureau has ordered Citibank and its subsidiaries to pay $700 million to some of its customers due to illegal practices related to the bank’s marketing of credit card add-on products.
Consumer Financial Protection Bureau (CFPB) announced Tuesday that the bank was violating the law in selling seven add-on products to cardholders: AccountCare, Balance Protector, Credit Protection, Credit Protector, Payment Safeguard, IdentityMonitor, and Watch-Guard Preferred.
According to CFPB, from 2003 to late 2012 Citibank was engaged in illegal practices, including misrepresenting or omitting the cost of a product, enrolling ineligible customers in paid services, and making false claims about the services of their add-on products.
The bureau said 8.8 million cardholder accounts were affected by the bank's illegal practices and required parent company Citigroup to “reserve or deposit into a segregated deposit account an amount not less than $700,000,000.”
Citigroup Inc., the world’s biggest credit-card lender with approximately $1.3 trillion in assets, said in a statement on Tuesday that it has previously “discontinued sales of the products included in the agreements, which include credit monitoring and debt-protection products and wallet-protection services,” Bloomberg reported.
According to LA Times, Citigroup also added that it has been refunding customers since 2013 and will continue to notify and refund those who were affected. "Affected customers will automatically receive a statement credit or check and those no longer with Citi who are eligible will be mailed a check," Citigroup said.
CFPD Director Richard Cordray vowed Tuesday that his bureau will go on uncovering illegal credit card add-on practices. “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.”
The Citigroup settlement is among the highest for a CFPB enforcement action. In April 2014 Bank of America Corp. was forced to pay $727 million and in September 2013 the bureau ordered Chase to pay $309 million to 2.1 million credit card holders over similar violations.