BACK

Research and Statistics

CFPB settles with Citi over APR errors

Summary

Citi is paying refunds to credit card users whose APRs weren’t reduced in line with CARD Act rules after a rate increase.

The editorial content below is based solely on the objective assessment of our writers and is not driven by advertising dollars. However, we may receive compensation when you click on links to products from our partners. Learn more about our advertising policy.

The content on this page is accurate as of the posting date; however, some of the offers mentioned may have expired. Please see the bank’s website for the most current version of card offers; and please review our list of best credit cards, or use our CardMatch™ tool to find cards matched to your needs.

CFPB gavel

The federal government’s consumer financial watchdog has signed a settlement with Citi over the bank’s February announcement that it had failed to cut interest rates on some credit card users in line with regulations.

The consent order was signed by Consumer Financial Protection Bureau Acting Director John “Mick” Mulvaney on June 28 and announced June 29.

It formalizes the payment of $335 million in refunds to card holders who were affected by the lapse from 2011 to 2017.

About 1.75 million Citi card accounts are due refunds, averaging $190 each.

The bank has begun issuing the payments, which will continue through the end of the year, a Citi representative said. Cardholders who were affected by the high APRs do not need to take action, as the company will automatically reimburse them.

The CFPB said Citi will either issue an account credit or a bank check to the affected cardholders.

Citi apologizes for years-long errors

In a corporate statement, Citi said it is “pleased to have resolved the matter with the bureau, and we reiterate our sincere apologies to our customers for not correcting these issues sooner.”

Citi said it estimated only about 10 percent of people who were hit with a higher rate since 2011 were affected by a tardy reduction in the rate. Most cardholders received reductions as called for in regulations, a savings to them of $3 billion, the bank said.

Under the Credit CARD Act, accounts that are hit with a higher interest rate because of market conditions, or because of changes in their creditworthiness, must be reviewed at least every six months, to see if the factors behind the rate increase have changed.

In its reviews, Citi sometimes determined that customers were eligible for a lower rate, but withheld the rate cut because their FICO credit score was below a certain threshold, the CFPB’s order states. In other cases, Citi limited the reduction in rates based on FICO scores. The practices violated CARD Act rules, the agency said.

In another example, Citi converted some accounts from fixed rates to variable rates that were higher than the fixed rate, and failed to reevaluate the accounts as the rule required.

And in some accounts that were hit by multiple rate increases, Citi only reevaluated increases to the penalty rate for breaching contract terms – such as missing a payment. It did not reevaluate reasons for other hikes, such as credit risk, until after the missed payment was “cured,” usually by a string of six on-time payments.

The CFPB said it did not issue a penalty on Citi beyond the refunds that are already in progress because the bank identified the problem itself, during a broad compliance review in 2016, and reported the lapse to regulators.

See related:Paid late? Six on-time payments can erase penalty rate

What’s up next?

In Research and Statistics

Who rolls over card debt and pays late? Study finds surprises

Among cardholders who roll over their debt from month to month, age and other financial obligations — not income and education — are factors in who pays on time and who pays late, a new Auriemma Consulting Group study finds.

Published: June 26, 2018

See more stories
Credit Card Rate Report Updated: July 10th, 2019
Business
15.61%
Airline
17.59%
Cash Back
17.68%
Reward
17.58%
Student
17.79%

Questions or comments?

Contact us

Editorial corrections policies

Learn more

Join the Discussion

We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company’s business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.