Citigroup to refund $330 mn due to overcharging credit card accounts
24 February 2018
Citigroup will issue $330 million in refunds after the lender discovered it had overcharged nearly two million credit card accounts on their annual interest rates, a spokeswoman said yesterday.
Citibank, which holds around 150 million credit card accounts, said the error was detected in a routine internal review mandated under federal law. Citigroup said, it has notified regulators about the mistake.
''We sincerely apologise to our customers and are taking every action to provide refunds as quickly as possible,'' the bank spokeswoman, Elizabeth Fogarty, said in a statement.
The bank disclosed the error in its annual report which was filed yesterday with the Securities and Exchange Commission. According to the bank, it had discovered ''methodological issues'' in its calculations of some customers' annual interest rates.
According to Fogarty, the average refund would be $190 and that 1.75 million accounts were affected.
According to Matt Schulz, a senior industry analyst at CreditCards.com, it was rare to see a card company reveal a mistake of such magnitude.
''Two hundred dollars is a significant amount of money for an awful lot of people in this country,'' he said, Reuters reported. ''For this to have happened for almost two million accounts is a significant thing.''
The bank determined that a method it was using to calculate APRs failed to properly reflect the full benefit customers should have received for good behaviour, such as paying on time, the New York-based bank said yesterday in a securities filing.
Under the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 lenders are required to periodically review accounts whose annual percentage rate (APR) had been raised to see if subsequent good behaviour makes them eligible for a rate reduction.
"Citi has semi-annually reviewed US credit-card accounts that experienced an interest-rate increase to identify those eligible for a rate reduction," spokeswoman Liz Fogarty said in a statement. "A periodic internal review identified potential flaws in the methodology used to reevaluate interest rates on some credit-card accounts."