Economic News
Citigroup Refunding $330 Million in Interest Overcharges
Citigroup credit card holders may be in for a refund after the company discovered it had overcharged a number of customers. It’s estimated that 1.75 million Citi customers — equal to approximately 10% of their total cardholders— were assessed at a higher annual interest rate, with total refunds topping $330 million. As a result the company reports that the average refund being issued is $190, which includes interest. Regarding the overcharges, Citi’s head of global consumer banking public affairs Liz Fogarty said, “We sincerely apologize to our customers and are taking every action to provide refunds as quickly as possible.”
According to CNN Money, the error came as a result of Citi not properly updating user’s accounts when they were eligible for a rate reduction. Under the CARD (Credit Card Accountability, Responsibility, and Disclosure) Act of 2009, credit card issuers are supposed to perform semi-annual reviews to see if customers qualify for the different rate. For example, while making two consecutive late payments can raise your interest rates, making on-time payments for the next six month should make cardholders eligible for a rate decrease. Fogarty explained the error saying, “While we believed our methodology was sound, a periodic internal review identified potential flaws in the methodology used to reevaluate interest rates on some credit card accounts.”
Interestingly customers affected by the issue fall into two camps. Half of the cardholders in question received no rate reduction even though they were eligible. Meanwhile the other half did receive a reduction but it was not as significant as it should have been.
Despite the protections CARD puts in place, this Citi error should serve as a reminder to consumers to know their rights and keep a closer eye on their finances. Thankfully those affected will now be receiving refunds but one can’t help but wonder how easy it could have been for the problem to go unnoticed. On that note, to their credit, Citigroup does appear to be making things right — something that may help them win back consumer trust in an industry that so many are skeptical of.
