A $335 million dollar refund in credit card charges will be issued later this year by Citigroup to Citibank customers. According to a Citigroup spokeswoman cited in a Feb. 23 New York Times report, the bank decided to issue the refund after finding it had overcharged around 1.75 million of Citibank’s 150 million credit card accounts on their annual interest rates. The refund is expected to equal about $190 per account.
“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 spokeswoman, Liz Fogarty, said in a statement. “While we have found no evidence of employee misconduct, we should have identified these issues sooner.”
According to the New York Times, Citibank discovered the error while conducting an internal review required by the 2011 CARD Act, which requires credit card issuers to review the accounts of customers with interest rates that have risen due to bounced checks, missed payments, and related incidents. Following the review, the card issuers must determine whether those customers qualify for lowered interest rates.
Credit card issuers can increase rates for individuals who have been late on two consecutive credit card payments. Under the CARD Act, credit card holders who have been responsible about making their minimum payments on time for the next six months are eligible for an interest rate reduction.
“It used to be that if you hit a rough patch and miss a couple of payments you could end up being stuck with a penalty rate for a really long time,” Matt Schulz, an analyst at CreditCards.com, was quoted as saying by Financial Times.com. “That shouldn’t happen any more. For millions of Americans who live paycheck to paycheck, $190 matters. It may not change their lives, but they will certainly welcome it, especially since they shouldn’t have had to part with it in the first place.”
The overcharging error was disclosed by Citigroup Friday in its annual report to the Securities and Exchange Commission. According to St. Louis Post Dispatch, Citigroup has factored the cost of the reimbursements into its 2017 results.
The overcharging incident is not the first snag Citigroup has run into. In 2015, the organization was fined $70 million in connection with illegal practices connected with its marketing of card add-on products, according to a February 23 L.A. Times report. The bank was also ordered to pay $700 million to customers.
By: Jeremy Levin
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