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15 AUGUST 2016
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Wednesday, 22 July 2015 11:37
Citi fined 1% of revenue for illegal card practices

Fines and settlements now reaching US$17bn for the bank

Citigroup retail bank has been ordered to pay $700 million compensation to borrowers for illegal credit card practices.

The fine has been imposed by the Consumer Financial Protection Bureau (CFPB), which was set up under the 2010 Dodd-Frank Act aimed at reforming Wall Street. The CFPB has been focussing recent years on credit card payment protection, credit score tracking and other add-on products.

In addition to the US$700m fine, Citi will also pay civil penalties of US$35 million each to the consumer finance watchdog and the Office of the Comptroller of the Currency.

The settlement is the CFPB's tenth such case according to Director Richard Cordray which led to commentators remarking that "they (the CFPB) are just marching through the industry."

Other major US banks already fined over credit card misconduct include JPMorgan Chase & Co and Bank of America Corp.

Citi's settlement is substantial, amount to approximately 1% of the bank's estimated revenue for 2015, according to Thomson Reuters StarMine.

"Citi is fully reserved to pay costs associated with the agreements," the bank said in a statement.

As of May 21, 2015 Citi had paid out over $17 billion in fines and settlements since the financial crisis.

The CFPB said that about 7 million customer accounts were affected by Citibank's "deceptive marketing" practices, which included misrepresenting costs and fees and charging customers for services they did not receive.

A Citibank unit also "deceptively" charged nearly 1.8 million consumer accounts often unnecessary same-day payment fees while collecting payments, the CFPB said.

Citi said it had been issuing refunds and had stopped selling products that were part of its agreements with the regulators, including credit monitoring and debt protection products.

Capital One Financial Corp, American Express Co and Discover Financial Services are among other card issuers that have been fined by the CFPB since 2012.
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