Last week, the Consumer Financial Protection Bureau announced a settlement with Citibank, Inc., stemming from violations of the Truth in Lending Act. Citibank will be required to pay restitution totaling $335 million to 1.75 million consumers. Significantly, however, Citibank will not be fined by the CFPB.
Citibank allegedly violated the Truth in Lending Act by failing to review the annual percentage rates of consumer credit card accounts as required by law. Also, the CFPB alleges that Citibank failed to have reasonable written policies and procedures in place to conduct the APR reevaluations consistent with regulation.
Banks are permitted to periodically change the interest rates they charge on outstanding credit-card loans based on market conditions or a customer’s changing credit risk. But the act dictates that if banks previously increased the annual percentage rate on a card they must review the account every six months to assess whether the factors that prompted the increase have changed. Citibank allegedly failed to complete those reviews. As a result, many consumers who were due a decrease in APR never received it and therefore paid more than they should have.
The consent order contains all the language typical of agreements that the CFPB has announced over the past several years, with one significant omission. There is no civil penalty assessed to Citibank. This is a departure from previous consent orders that invariably required both restitution and a penalty paid into the Bureau’s Civil Penalty Fund. In November, Citibank’s student loan division had to pay $3.75 million to consumers and a $2.75 million penalty for incorrectly charging late fees and adding interest to the loan balances of borrowers, though they were still in school and eligible to defer student loan payments. On top of that, the CFPB said Citibank misled consumers about monthly bills and didn’t disclose information when it denied borrowers’ requests to release their cosigners.
The bureau gave several reasons for foregoing a fine. First, Citibank reported the violations to the bureau voluntarily. Because of that, no bureau resources had to be used to investigate the situation. Finally, by the time Citibank reported its errors, it had already undertaken efforts to pay restitution to consumers without being ordered to do so.
“We reiterate our sincere apologies to our customers for not correcting these issues sooner,” Citigroup said in a statement. The company said an internal review found problems with some credit-card accounts and regulators were promptly informed. Citigroup “found no evidence of employee misconduct.”