A credit policy issue came back to roost at Citi. Cured delinquent accounts should have received better rates and not be permanently classified as delinquent.
- (Citi) determined that a method it was using to calculate APRs didn’t properly reflect the full benefit customers should have received for good behavior, such as paying on time, the New York-based bank said Friday in a securities filing that disclosed the issue and the total cost. It’s currently reviewing accounts and plans to have refund checks in the mail by the second half of the year.
Win big, lose big.
- The Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 requires lenders to periodically review accounts whose APR had been raised to see if subsequent good behavior makes them eligible for a rate reduction.
- From 2011 to 2017, the bank delivered $3 billion in savings through such reviews. That was about 90 percent of what customers should have received.
Good news is they turned themselves in before regulators found the problem.
- The lender discovered the flaws on its own and self-reported it to regulators, according to the filing. It didn’t find any evidence of misconduct. The Consumer Financial Protection Bureau oversees lenders’ compliance with the CARD Act.
Now, Citi can sleep. (hopefully).
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
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