Bank's illegal card practices will cost it $700 million

On Tuesday it became known that the retail division of Citigroup Inc will return to clients $700 million received from “illegal activities with credit cards.” In particular, we are talking about providing false information about the cost of the loan and services related to it, or charging fees for unprovided or unnecessary services. The return of funds is one of the conditions of the agreement between the bank and the US Consumer Financial Protection Bureau.

The US Consumer Financial Protection Bureau (CFPB) and several units of Citigroup Inc, including its retail bank, have agreed to resolve claims brought against the financial services corporation in connection with its use of “illegal credit card activities”.

By illegal actions, the Bureau understands the provision of false information about the cost of a loan or services, other actions that can be regarded as deceptive marketing actions, as well as the provision of unnecessary paid services or charging fees for services that were not provided. According to the bureau, about 9 million people became victims of such actions.

In addition to paying victims, as part of the settlement, the bank will pay $35 million each in fines to the CFPB and the Office of the Comptroller of the Currency.

As the bureau notes, the resolution of claims against Citigroup is the tenth such event since the CFPB was created in 2010 in accordance with the Dodd-Frank Act, aimed at reforming the country's financial system. Previously fined banks include JP Morgan Chase & Co, Bank of America Corp., American Express Co and Discover Financial Services.

Financial analysts look at the bureau's activities with poorly concealed irritation. “They (CFPB. —Kommersant ) are literally stepping on the banks like a steamroller. They like large sums, especially when the largest percentage is returned to bank customers,” says FBR&Co analyst Edward Mills, adding that this is explained by purely political considerations, since the structure itself is the fruit of political bargaining between Republicans and Democrats in Congress.

According to Thomson Reuters experts, the amount the bank was punished corresponds to approximately 1% of projected revenue in 2015. In total, since the beginning of the financial crisis in the United States, Citi has already paid more than $17 billion in fines. “Citi's costs associated with these agreements are fully reserved,” the bank said in a statement.

Philip Overnight

Citigroup is recognized as a cheater