Citizens Bank, one of the largest regional banks in the country, has agreed to pay a $9 million civil penalty to settle allegations it violated consumer protection laws when servicing some of its credit card customers.
Citizens Bank “failed to properly manage and respond to customers’ credit card disputes and fraud claims,” according to the Consumer Financial Protection Bureau, which in 2020 filed a lawsuit against the bank.
“Federal law provides important rights to credit cardholders when disputing transactions and resolving billing errors,” said CFPB director Rohit Chopra when announcing the settlement on Tuesday.
“The CFPB will be closely watching the conduct of the credit card industry,” he said, noting that US credit card debt is projected to soon top $1 trillion.
The federal Truth in Lending Act requires credit card issuers such as Citizens Bank to investigate customer claims, send notifications to customers, and, when claims are valid, refund the error or fraud amount.
But, in its 2020 lawsuit, the CFPB alleged that for a five-year period ending in 2016, Citizens Bank failed to “reasonably investigate and appropriately resolve” billing errors and customers’ claims of unauthorized uses of their credit cards. Credit cardholders are legally liable for no more than $50 when their cards are stolen or lost and used by an unauthorized person.
Citizens Bank responded to customer claims by “making customers jump through unnecessary and burdensome hoops” that were not legally required, according to a CFPB press release.
As an example of such a “hoop,” the CFPB cited Citizens Bank’s requirement that customers file a sworn statement, known as a “fraud affidavit,” when complaining of billing errors or unauthorized use of their credit cards, and then summarily dismissed complaints without an affidavit.
Citizens Bank required those affidavits to be notarized and filed under the penalty of perjury, the lawsuit says. The bank also required customers to “agree to appear as a witness in court, to testify to the facts stated” in the affidavit, the lawsuit says.
“In numerous instances, Citizens [Bank] automatically denied” claims of consumers who refused to or were unable to complete” the affidavit, the lawsuit says.
Under the terms of the settlement, Citizens Bank, which has already discontinued use of the fraud affidavit, has agreed to not bring it back into use.
Citizens Bank, in a statement, said the issues cited by the CFPB impacted “a very small” number of its 1.2 million credit card customers — about 25,000, or about 2 percent.
Citizens Bank said it “self-identified operational errors” back in 2015, and “contacted the CFPB to report the issues while voluntarily beginning remediation efforts.”
Those remediation efforts were quickly completed and “exceeded all obligations to make customers whole,” the statement said.
“While 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, we are pleased to put this matter behind us,” said Polly Klane, general counsel of Citizens Bank.
“We remain proud of our commitment to transparency, our rigorous compliance programs, and our consistent effort to treat customers fairly and operate responsibly,” the statement said.
In the 12-page settlement agreement, Citizens Bank said it “neither admits or denies” the CFPB allegations. The settlement agreement requires approval of a judge in US District Court in Providence, where the CFPB lawsuit was filed and where Citizens Bank is headquartered.
Besides the fraud affidavit issue, the CFPB lawsuit alleged that Citizens Bank “failed to consistently refund all charges, including finance charges and fees,” when it resolved billing errors and other claims in consumers’ favor.
“In many cases Citizens failed to refund the full amount due by … mistakenly calculating the amount of finance charges and fees based on the date the dispute was placed in its system of record, as opposed to when the dispute arose,” the CFPB lawsuit say.
The CFPB lawsuit also accused Citizens Bank of failing to consistently send customers written acknowledgement of their billing errors claims within 30 days of receipt, and of failing to inform customers when it determined after investigation that there was no billing error.
Finally, the CFPB lawsuits alleged that Citizens Bank failed to provide referrals to credit counseling organizations. The bank “advised consumers to call a specific toll-free number … but the bank had no policies or procedures in place to ensure that its employees provide credit counseling information when customers called the designated phone line.”
“They were routed based on the status of their accounts: customers whose accounts were in good standing were routed to a general customer service department, and consumers whose accounts were delinquent were routed to the collections department,” the lawsuit said.
The $9 million penalty, if approved by a judge, will be payable to the CFPB’s victims relief fund.
Citizens Bank, which has more than $220 billion in assets, operates more than 1,100 branches in Massachusetts, Rhode Island, Connecticut, New Hampshire, Vermont, Delaware, Florida, Maryland, Michigan, New Jersey, New York, Ohio, Pennsylvania, and Virginia, as well as Washington, D.C.
Consumers can submit complaints about credit card servicing and other financial products and services on the CFPB’s website or by calling (855) 411-CFPB (2372).