Citi issuing refunds to customersWe sometimes take it for granted that the banks and other financial institutions we do business with have our best interests at heart, or are at least following the legal guidelines set out for them, but unfortunately that is not always the case. This was proven in recent years with the Wells Fargo scandal, which exposed the creation of millions of fake accounts under consumers’ real names, as well as the Equifax debacle that is still slowly unraveling. Now, it’s Citigroup’s turn to issue apologies — and refunds — to approximately 1.75 million of its U.S. accounts, to the tune of $335 million. Why is Citi issuing refunds, who is going to get them and how much will each person get? Stay tuned as we dive into this story.

An internal review revealed flawed interest rate evaluations

During an internal review conducted in accordance with the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) in late 2016, Citi determined that there was a weakness in its system for detecting which accounts were eligible for a reduction in their interest rates. The CARD Act dictates that credit card issuers may increase the interest rates of credit card accounts which miss two consecutive payments. You might be familiar with this concept as a penalty APR. However, the CARD Act also stipulates that if the account owner makes their minimum monthly payments on time for the next six months in a row, they are eligible for a rate reduction. Keep in mind that those who made a late credit card payment aren’t the only ones who may be eligible for a refund, as Citi often provides APR reviews for customers who make timely payments and have overall good credit behavior. This means those who pay their credit card on time may have been looked over for an APR reduction. Once it realized its error — which the bank described as human in origin, rather than a computer or other glitch — Citi went back and reviewed every account from 2011, when the CARD Act when into effect, and forward to determine how many customers were impacted by the flawed methodology.

Who is Citi issuing refunds to?

According to Citi, its investigation into the matter revealed that approximately $3 billion in savings was delivered to consumers during the period of 2011 to 2017 in the form of interest rate reductions. This corresponds with about 90% of customers who should have received a lowered interest rate — the other 10%, however, either didn’t get the rate cut they deserved, or were entitled to an APR reduction but did not get it. Thus, the bank will be refunding those approximately 1.75 million accounts the money they overpaid, including interest. It’s important to note that this applies only to Citi-branded credit cards, including the bank’s regular credit cards as well as co-branded cards with merchants and store-specific credit cards. Loans, mortgages, bank accounts and other financial products were not impacted.

How much will customers get?

While not everyone will receive the same amount, Citi has said that the average person will be refunded about $190. This figure includes the added interest. The bank will be sending refund checks to eligible customers in the latter half of 2018. If you believe you might be impacted, you don’t need to do anything, as Citi will be contacting everyone involved to issue their refund. The bank will also be reaching out to those who no longer have a Citi account to ensure that they get their refund. Those who have further questions will want to contact Citi customer service directly.

This is not the first time Citi has come under fire, as in 2015 it was fined $70 million and forced to pay $700 million to customers over illegal and deceptive credit card practices. By contrast, this most recent issue was self-reported by Citi to its regulators without any prompting or external investigation. The bank has promised to review its processes and try to figure out what happened and why, so as to prevent it from occurring again in the future.

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