Citi to pay $ 700 million for deceptive marketing

Those affected will automatically receive refund, bank says

Citibank and its subsidiaries Tuesday were ordered to pay $ 700 million in consumer relief for illegal practices related to credit card add- on products and services.

A consent order issued by the Consumer Financial Protection Bureau said about 7 million consumer accounts were affected between 2003 and 2012 by the bank’s deceptive marketing of five debt- protection products and additional add- ons that offered credit monitoring.

The alleged illegal practices included:

Marketing that misrepresented or failed to inform consumers about the cost of the products. Although Citibank told its telemarketers to offer “free” 30- day trials, the bank still charged customers for coverage during that period.

Falsely claiming the fraud-alert services would notify customers of fraudulent purchases. Instead, the monitoring only provided alerts to changes in customer credit files maintained by major credit- reporting firms.

Using leading or vague questions to sign customers up for credit card add- ons without specific authorization.

Enrolling customers in the programs and charging them for services even though the custom- ers were ineligible for coverage.

“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 ( of existence), this is the 10th action we’ve taken against companies in this space for deceiving consumers.”

Citibank said it cooperated with investigations by the CFPB and the U. S. Office of the Comptroller of the Currency and began taking corrective actions to reimburse customers in 2013.

“Citi will continue to notify and refund affected customers,” the bank said. “Affected customers will automatically receive a statement credit or check, and those no longer with Citi who are eligible will be mailed a check.”

The $ 700 million in customer relief paid by Citi includes about $ 479 million for an estimated 4.8 million consumer accounts harmed by the deceptive marketing or retention practices. The bank will also pay roughly $ 196 million to the estimated 2.2 million consumer accounts that failed to receive promised creditmonitoring services.

Additionally, Citi will pay $ 70 million in cumulative penalties to the CFPB and the Office of Comptroller of the Currency and agree to be barred from marketing add- on products to customers until the bank submits a compliance plan to the consumer agency. A Citibank subsidiary known as Department Stores National Bank must provide approximately $ 23.8 million in relief to nearly 1.8 million consumer accounts for charging expedited payment fees, the CFPB said.

Citibank said it had previously disclosed the investigations to investors. Shares of parent firm Citigroup ( C) closed up 0.42% at $ 59.10 Tuesday.

2009 PHOTO BY MARK LENNIHAN, AP Citibank says it began taking corrective actions in 2013.