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Citigroup's extra fees for add-on services is now costing the company $770 million.
In an agreement with the Consumer Financial Protection Bureau (CFPB), Citigroup will pay $70 million in fines and refund $700 million to consumers for illegal and deceptive credit card practices.
Here is what you need to know:
Illegal and Deceptive Practices
The Consumer Financial Protection Bureau (CFPB), created by the Dodd-Frank Act after the 2008 financial crisis, is responsible for regulating the credit industry and investigating illegal and deceptive practices. In 2013, the CFPB fined JP Morgan Chase for unfair billing practices for credit card add-on products. In 2014, Bank of America was fined for a similar violation. Citigroup is the CFPB's latest victim.
In its investigation into the company, the CFPB found that, as far back as 2000, Citi charged customers for add-on products such as credit score monitoring or rush processing of payments. The company allegedly signed consumers up for add-on services when it was unclear whether the consumer actually said they wanted it or not. In another case, Citi charged customers for credit monitoring services but did not perform any of the services. Also, the company charged customers a $14.95 expedited payment fee for over-the-phone payments without informing them about free payment options.
These add-on services are illegal because they provide no actual benefit to the consumer.
As part of the settlement, Citi has agreed to issue refunds to 8.8 million affected customers. Most customers will receive a statement credit. Customers who no longer have a Citi account will receive a check in the mail.
Watch out for Deceptive Charges
Citi has reported that it stopped these deceptive practices since 2013. Also, the CFPB's enforcement activities have largely ended the practices among other banks and credit card companies as well.
However, consumer financial advocates warn that payday lenders and so called loan sharks still engage in these deceptive practices. If you believe that your lender or credit card company is engaging in illegal practices, you can make a complaint with the CFPB or consult with an experienced consumer protection attorney for help.