Citibank Gets Hit With $700M Fine for Deceptive Practices

citi_wall st

If you were one of the 8.8 million consumers who enrolled in Citi’s identity theft and monitoring protection programs, you may be entitled to a refund. Recently, the CFPB slapped Citi with a hefty $700M fine for deceiving their customers. This is the second largest settlement in history, just $27M shy of Bank of America’s settlement in 2014 which was very similar to this case.

The good news is that you don’t have to download years of credit card statements to see if you enrolled in their phony add-on products. Citibank should have already notified you or will notify you directly, there is no needed action on your part.

However, if you didn’t get notified but still feel like you’re entitled a refund, you can contact Citibank directly. So What Exactly Was Citibank Selling?

Citibank was primarily selling three different financial products: credit and identity monitoring services, debt protection products, and expedited payment fees.

Credit and ID Monitoring Services 

One of the services that Citi was selling was called PrivacyGuard. PrivacyGuard offers both credit and ID monitoring services.  Their website claims to monitor your credit for $1 for the first 14 days, and then $19.99/month thereafter.

screenshot-offer.privacyguard.com 2015-07-22 11-26-15

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My biggest personal problem with this offer is that the scores they offer isn’t used by lenders to make decisions. Instead, PrivacyGuard provides CreditXpert scores.

Nearly 2.2 million customers who enrolled from 2000-2013 will receive roughly $196 million in refunds. Another product Citi was selling was their IdentiyMonitor that allows you to stay on top of any recent changes to your credit report. They were charging $1 for the first 30 days and then $8.95 per month thereafter.

Citi violated the law when they were enrolling customers into the program as well as when customers were trying to cancel their monthly subscription. The CFPB found that the refund amount was determined by whether the customers tried to cancel and how long they were on the product.

Debt Protection Services

Now here’s an interesting one. Citibank was selling specific debt protection services that “helped consumers’ in times of hardship. One of them was called AccountCare. Here’s a quick snapshot of  how it works:

screenshot-www.accountonline.com 2015-07-22 11-43-40

AccountCare allows members to buy “insurance” in case you have a catastrophic event in your life that hinders you from paying your bills. AccountCare is actually owned by Citi and uses Sears’ licenses. The CFPB found that the deceptive practices happened during telemarketing sales calls, while others happened when they were applying for department store cards. It could be that the sales reps were sugar coating the AccountCare program while the customers were signing up for new cards.

The other “debt protection service” that Citi was selling was their own branded version of AccountCare called “Payment Safeguard Deluxe”. The fees were slightly cheaper, $0.94 per $100 of your new balance vs $0.96.

screenshot-www.cardbenefits.citi.com 2015-07-22 11-56-27 (2)

Expedited Payment Fees

This by far is one of the most ridiculous fees that Citi has been charging their customers. The CFPB found that Citibank violated the law when they were collecting past due payments from customers who were issued Department Stores National Bank (DSNB) cards. During the collection calls, Citi charged customers a $14.95 fee without telling their customers about it or even as far as misrepresenting the exact reason for the fee.

Here are the violations as reported by the CFPB:

  1. Deceptive acts or practice relating to the marketing and sale of certain credit card add-on products
  2. Acts or practices relating to CCSI USA’s telemarketing of certain Respondent credit card add-on products in violation of the Telemarketing Sales Rule
  3. Unfair acts of practice relating to teh billing and administration of certain add-on products
  4. Deceptive acts of practice relating to debt collection on delinquent DSNB accounts

To view the full 57 page report, go here.

So What’s the Moral of the Story?

You don’t need to spend money to monitor your credit. There are a handful of free credit monitoring services such as Credit Karma or Credit Sesame that will monitor it for free.

The general rule is that a lot of add-on products really aren’t worth the money. For example, every time you purchase a flight you’ll be asked to purchase flight insurance which allows you to get a full refund in case of an emergency. Car rental agencies will sell their own insurance as well. Always be cautious when you’re purchasing add-on products!

Have you ever purchased any of Citi’s products? If so, we’d love to know! 

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