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The Consumer Financial Protection Bureau (CFPB) entered into an agreement with Citibank on July 21, 2015, that will provide an estimated $700 million in relief to 8.8 million customers harmed by illegal practices related to credit card add-on products and services. Additionally, Citibank \will pay $35 million in civil money penalties to the CFPB.
According to the CFPB, 7 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.
"We continue to uncover illegal credit card add-on practices that are costing unknowing consumers millions of dollars," CFPB Director Richard Cordray said in a statement. "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."
Citi claims it stopped the practices in question in 2013, and that it has been issuing statement credits since that time to the affected customers. For those customer who no longer have an account with Citi, the bank will mail a check.
CFPB alleges that Citi illegal activity covered several products, and goes back to 2000 and continued through 2013. Claims are that Citi telemarketers deceptively and fraudulently sold its customers credit card add and related products such as:
- Identity theft protection services with a 30-day free trial, when no such free trial existed.
- Expedited payment fees of $14.95 to customers who made over-the-phone payments without telling them about no-fee options.
- Add-on credit monitoring service when it was ambiguous whether the consumer actually agreed to it.
- Credit monitoring services when Citi was not performing those services.
According to Nick Bourke of the Pew Charitable Trusts, "add-on services, for the most part, provide no benefit to consumers and people should be very careful to sign up for them."
Credit card add-on services were once a lucrative source of income for credit card issuers. These services were largely sold to consumers as ways to protect their credit scores or identities or protect them if they lost their jobs. In reality, however, these services provided little benefit. The marketing of those services largely ended in recent years thanks to increased regulatory scrutiny by the CFPB.