Citibank Neither Admits Nor Denies CFPB Charges, to Pay $700 Million

In a consent decree released today, Citibank NA neither admitted nor denied charges brought by the Consumer Financial Protection Bureau (CFPB)  and will provide an estimated $700 million in relief to eligible consumers harmed by allegedly illegal practices related to credit card add-on products and services.

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Roughly seven million consumer accounts were affected by Citibank’s deceptive marketing, billing, and administration of debt protection and credit monitoring add-on products.

A Citibank subsidiary also deceptively charged expedited payment fees to nearly 1.8 million consumer accounts during collection calls. Citibank and its subsidiaries will pay $35 million in civil money penalties to the CFPB.

“We continue to uncover illegal credit card add-on practices that are costing unknowing consumers millions of dollars,” said CFPB Director Richard Cordray. “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.”

Citibank, N.A. is a national bank and insured depository institution. Citibank, as well as its subsidiaries Department Stores National Bank, and Citicorp Credit Services, Inc. (USA), marketed or offered credit card add-on products to consumers nationwide.

From at least 2003 through 2012, Citibank actively marketed and enrolled consumers in five debt protection add-on products: “AccountCare,” “Balance Protector,” “Credit Protection,” “Credit Protector,” and “Payment Safeguard.”

These products promised to cancel a consumer’s payment or balance, or defer the payment due date, if the consumer experienced certain hardships, such as job loss, disability, hospitalization, and certain life events, such as marriage or divorce.

Citibank also marketed and sold other add-on products – “IdentityMonitor,” “DirectAlert,” “PrivacyGuard,” and “Citi Credit Monitoring Services” – that offered credit-monitoring or credit-report-retrieval services.

Citibank also offered “Watch-Guard Preferred,” a wallet-protection service that notified credit and debit card issuers if the consumers reported a card lost or stolen.

CFPB found that Citibank or its service providers marketed these products deceptively during telemarketing calls, online enrollment, “point-of-sale” application and enrollment at retailers, or when enrolled consumers later called to cancel certain products.

Confusing text on pin-pad offer screens at the point of sale increased the likelihood that consumers applying for credit cards at a retailer would not realize they were both applying for credit and purchasing debt-protection coverage.

These illegal practices affected an estimated 4.8 million consumer accounts. Among other things, Citibank’s misleading or illegal marketing or retention practices included:

CFPB alleged that in some cases, telemarketers misrepresented or did not inform the consumer about the cost of the products.

In certain telemarketing scripts, Citibank instructed telemarketers to claim a blanket “free” 30-day trial period, when Citibank still charged consumers during the initial 30 days of membership.

In other instances, Citibank failed to inform consumers that they would be billed after the 30-day trial period if they did not cancel the product. Citibank also told some consumers they could avoid the fee by paying their balance in full by the due date. But to avoid the fee, consumers had to pay off the balance before the end of their billing cycle so that there would be no balance on the account when billing statements went out.

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