Citi discovered errors in re-evaluating APRs for millions of cardholders who resumed on-time payments after slipping up
The bank on Friday said it discovered errors in reviewing and re-calculating interest rates for customers who made at least six consecutive on-time payments after a slip-up – a requirement under the CARD Act. The $330 million in refunds will cover 1.75 million card accounts that were affected between 2011 and 2017 – an average of $190 per account.
A provision of the CARD Act allows cardholders who miss payments and get hit with penalty APRs to have their original rates restored after sustained good behavior. Under the rule, the bank must review the possibility of restoring your original APR after you make six consecutive on-time payments under a penalty APR. It only applies when a higher interest rate is imposed because a payment was 60 days late or more, and it doesn’t cover new purchases.
“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,” Liz Fogarty, head of global consumer banking public affairs, said in a statement. “While we have found no evidence of employee misconduct, we should have identified these issues sooner.”
Fogarty also said about 90 percent of the interest rate savings due to customers under the rule were delivered as required.
Citi gave no specific timeframe for doling out refunds – Fogarty said the bank would move to reimburse affected customers “as quickly as possible.”
See related: Average card APR holds steady at 16.41 percent, Late payments on cards worsen as balances rise, N.Y. Fed says