Citizens Bank Pays $9m Penalty For Credit Card Dispute Failure

May 25, 2023
Citizens Bank has settled a case with the Consumer Financial Protection Bureau which alleged the bank automatically denied certain credit card fraud claims.

Citizens Bank has settled a case with the Consumer Financial Protection Bureau (CFPB) which alleged the bank automatically denied certain credit card fraud claims.

The CFPB alleges that Citizens failed to properly manage and respond to customers’ credit card disputes and fraud claims.

Under the Truth In Lending Act (TILA), the credit card issuer is required to investigate, send notifications and provide refunds if a person reports a billing error or fraud.

According to the complaint, between 2010 and 2015, Citizens automatically denied consumers’ unauthorised fraud claims and billing error notices when the consumers did not return an affidavit required by the bank.

Such an affidavit, however, included language that the consumer agrees to testify as a witness in court, required notarisation and signing the affidavit made the consumer subject to the penalty of perjury.

In other cases, when Citizens refunded unauthorised fraud payments and billing errors, the refunded amount did not include finance charges and fees associated with the payment or they were miscalculated.

Additionally, consumers filing disputes with the bank did not receive notices to inform them that their disputes had been received or that the dispute was denied.

The bank also regularly re-routed consumer calls from its toll-free number to other departments and could not provide credit counselling referrals, as required by law.

“Federal law provides important rights to credit cardholders when disputing transactions and resolving billing errors,” said CFPB director Rohit Chopra.

“As outstanding credit card debt approaches $1trn, the CFPB will be closely watching the conduct of the credit card industry,” he added.

Citizens Bank is one of the 15 largest consumer banks in the United States with branches and ATMs in 14 states and Washington, DC. It is part of the Citizens Financial Group, which reported $222bn in assets as of March 31.

The settlement puts an end to the three-year court proceedings that started in January 2020.

Citizens agreed to pay $9m to the CFPB’s victims' relief fund and ensure that its resolution of billing error notices and unauthorised use claims comply with the law.

Commenting on the settlement, Polly Klane, general counsel of Citizens, said the bank is “pleased to put this matter behind us”, although “Citizens continues to disagree with the CFPB’s stance with respect to these long-resolved issues, which were self-identified and voluntarily addressed years ago”.

The bank emphasised that the practices affected 2 percent, or about 25,000, of Citizens’ approximately 1.2m credit card customers.

The failures were discovered by the bank, which voluntarily started to take steps to correct them and reported them to the CFPB.

According to the bank, Citizens fixed the errors “shortly after the issues were discovered” and “the remediation exceeded all obligations to make customers whole”.

“We remain proud of our commitment to transparency, our rigorous compliance programs, and our consistent effort to treat customers fairly and operate responsibly,” Klane said.

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