Citigroup Customers To Split $330M Refund
Citigroup Inc. (NYSE: C) has announced its intentions to refund about $330 million in credit card fees to its customers. The company disclosed the error in its annual report filed with the Securities and Exchange Commission at the end of last week. A spokeswoman for the company said, “We sincerely apologize to our customers and are taking every action to provide refunds as quickly as possible.”
The move comes after the company discovered it had overcharged the annual interest rates for 1.75 million credit card accounts. These 1.75 million accounts will receive refunds. According to the company, the average refund per account will amount to about $190, including interest. The cost of the refunds has already been factored in to Citigroup’s 2017 results.
The company blamed a weakness in its detection of accounts eligible for rate reductions for the issue. The Credit Card Accountability, Responsibility, and Disclosure Act of 2009, also known as the CARD act, mandates that credit card issuers review accounts that experienced an interest rate increase semi-annually to determine if those accounts are eligible for a rate reduction. The weakness was described as human error in establishing methods to determine eligible accounts.
Liz Fogarty, head of global consumer banking public affairs at Citi, said, “While we believed our methodology was sound, a periodic internal review identified potential flaws in the methodology used to reevaluate interest rates on some credit card accounts.” The errors apparently amounted to about 10 percent of the interest reductions cardholders were due. Forgarty said, “We estimate that 90 percent of the interest rate savings due to customers were delivered as required.”
The company said it has informed regulators and examined accounts going back to 2011, when the CARD act went into effect. The refunds won’t have much of an impact on Citi. According to the Nilson Report, the bank was the third biggest U.S. card lender in 2016. Citi has about 150 million credit card accounts.