July 27, 2015

CFPB Continues Credit Card Add-On Products Enforcement with $700 Million Penalty

3 min

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.