Citibank is set to refund $335m to around 1.75 million credit card customers under a settlement with the Consumer Financial Protection Bureau (CFPB).
The Bureau said that the charges have been levied as Citibank violated the Truth in Lending Act because it failed to reevaluate and decrease the annual percentage rates (APRs) of certain consumer credit card accounts.
In addition, CFPB alleged that the bank lacks reasonable written policies to perform APR reevaluations consistent with regulatory requirements.
“Under the terms of the consent order, Citibank must correct these practices and pay $335m in restitution to consumers affected by these practices. The Bureau did not assess civil money penalties based on a number of factors, including that Citibank self-identified and self-reported the violations to the Bureau, and self-initiated remediation to affected consumers,” CFPB said in a statement.
In February this year, Citibank announced that an internal review found the method used to calculate APRs incorrect.
This method was intended to minimise interest charges for previously lapsed cardholders who resume timely payments.
Commenting on the findings of the internal review, Citigroup spokeswoman Liz Fogarty said: “Citi has semi-annually reviewed US credit card accounts that experienced an interest rate increase to identify those eligible for a rate reduction.
“A periodic internal review identified potential flaws in the methodology used to re-evaluate interest rates on some credit-card accounts.”