Citibank to Refund $335 Million for Overcharged Interest Rates
The Bureau of Consumer Financial Protection has reached a settlement with Citibank for overcharging customers with high interest rates. The bank will refund $335 million to 1.75 million cardholders, an average refund of $191.
The Bureau says Citibank failed to reevaluate these accounts to see if customers qualified for lower annual percentage rates. This caused the customers to pay more in interest.
According to the Truth in Lending Act and the official consent from the BCFP, creditors are required to evaluate accounts every six months after an APR increase. If the factors that caused the APR increase are no longer valid, the APR must be reduced. For instance, if a person had an interest increase because of consistent late payments, their APR may be reduced again after six months of good payment history.
Citi said in a statement the error was a result of flawed methodology for their account reviews. “Citi promptly informed its regulators, revised its methodology going forward and conducted a comprehensive review, which found no evidence of employee misconduct.”
The bank has already begun issuing refunds to customers, and will continue to do so over the next several months.