On July 21, 2015, the CFPB ordered Citibank to provide relief to eligible
consumers to the tune of roughly $700 million. Citibank's
illegal actions included deceptive marketing, billing, and
administration of debt protection and credit monitoring add-on
products. As a result, the CFPB ordered Citibank to pay $700
million in relief to nearly 9 million accounts, and a $35 million
penalty to the CFPB's Civil Penalty Fund. Consumers need not
take any action to receive their refunds. Citibank was also ordered
to end all unfair and illegal practices.
For at least nine years, Citibank marketed and enrolled consumers
in five debt protection add-on products that promised to cancel a
consumer's payment or balance, or defer a due date if the
consumer experienced certain hardships, as well as other add-on
products that offered identity theft protection through credit
monitoring or credit report retrieval. To sell these products
Citibank used deceptive telemarketing calls, online enrolment, or
point-of-sale enrollment at retailers. Citibank's misleading or
illegal marketing or retention practices included:
- Misrepresenting costs and fees for coverage: Telemarketers would not tell the consumer the cost of the product, or would state that the service was covered under a "free" 30-day trial. Citibank would then charge consumers during those 30 days. At other times, Citibank would fail to inform consumers that they would be billed for the trial period if they did not cancel the product.
- Misrepresenting benefits of some products: Citibank represented to consumers of the credit-monitoring product that the service alerted consumers to fraudulent purchases. Instead, the product alerted consumers only when a major reporting company made a change to the consumer's file. Citibank also told consumers that its credit score was generated from all three major credit reporting companies, when it was actually generated by a third-party vendor.
- Illegal practices in the enrollment process: Telemarketers would use leading questions to obtain billing authorizations for add-on products. In addition, telemarketers would enroll customers without any billing authorization.
- Misrepresenting or omitting information about eligibility for coverage: Even when consumers were ineligible to receive product benefits, Citibank would enroll them in the product.
For at least 13 years, Citibank also used unfair billing
practices. In some instances, Citibank would bill customers without
having the authorization necessary to perform the credit monitoring
services. Even when the consumer did not receive the benefits of
the service, Citibank would still charge for it.
Finally, when collecting payment on delinquent credit card
accounts, Citibank would offer consumers a way to pay by phone so
that the payment would post on the same day. Consumers were misled
because the fee was merely called a "processing" fee, and
the telemarketer did not explain its true purpose. Moreover, there
were often no-cost payment alternatives that were not disclosed to
consumers, even though paying the fee for same-day posting was
often not in the consumer's interest.
Connor H. Crews (Summer Associate) assisted with the preparation of this article.
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