• by Thom Forbes  @tforbes, July 22, 2015

The Consumer Financial Protection Bureau has ordered Citibank and some subsidiaries to refund an estimated $700 million to roughly seven million customers who were victims of “deceptive marketing, billing, and administration of debt protection and credit monitoring add-on products” from “at least 2003 through 2012.”

Another 1.8 million customers were “deceptively charged expedited payment fees” during collection calls, according to the CFPB. Citibank and its subsidiaries — Citicorp Credit Services Inc. and Department Stores National Bank — must also pay $35 million in civil penalties to the CFPB.

“In our four years, this is the tenth action we’ve taken against companies in this space for deceiving consumers. We will remain on the lookout for similar conduct and will address it as we find it,” said CFPB Director Richard Cordray in a statement that also summarizes the actions taken Tuesday.

The CFPB said the bank “was violating the law in selling seven add-on products to cardholders: AccountCare, Balance Protector, Credit Protection, Credit Protector, Payment Safeguard, IdentityMonitor, and Watch-Guard Preferred,” reports Denise Hassanzade Ajiri for the Christian Science Monitor.

“The CFPB found that Citi often deceived customers about what they were signing up for or made it easier for them to purchase protections without knowing it,” reports the Washington Post. “For instance, some cardholders were told that credit-monitoring services would protect them from fraudulent purchases when the protection focused only on suspicious changes to their credit reports. Through telemarketers, the bank told customers that the service included a free 30-day trial even though they were being charged during that period.”

Parent company Citigroup — the world’s biggest credit-card lender with approximately $1.3 trillion in assets, Hassanzade Ajiri points out — said it had fully cooperated with the regulators, had stopped the practices in question, and has been refunding money to affected customers since 2013, according to Jim Puzzanghera in the Los Angeles Times.

“Affected customers will automatically receive a statement credit or check, and those no longer with Citi who are eligible will be mailed a check,” Citigroup said, Puzzanghera writes.

Other illegal practices include “using leading or vague questions to sign customers up for credit card add-ons without specific authorization” and “enrolling customers in the programs and charging them for the services even though the customers were ineligible for coverage,” writes Kevin McCoy for USA Today.

But wait, there’s more.

“In other instances, Citibank allegedly failed to inform consumers that they would be billed after the 30-day trial period if they did not cancel the product,” writes Ashlee Kieler for Consumerist. “The company also told some consumers they could avoid the fee by paying their balance in full by the due date. But it failed to specify that in order to avoid the fee, consumers must pay off the balance before the end of their billing cycle so that there would be no balance on the account when billing statements went out.”

The AP’s Ken Sweet reports that “Bank of America reached a similar, slightly larger settlement with regulators in 2014, and JPMorgan Chase was fined in 2013.”

This case is “one of the largest enforcement actions announced by the CFPB since it was created by the 2010 Dodd Frank financial law” on the one-year anniversary of the passing of legislation (which happens to be July 21), point out AnnaMaria Andriotis and Christina Rexrode in the Wall Street Journal.  

“While the new watchdog was criticized by some as an expensive and unnecessary addition to the Washington bureaucracy, it aims to protect consumers like you,” according to the blurb for an embedded eight question quiz that asks: “So how much do you know about it?”

Indeed, the CFPB — and who might run it — have been controversial from the start and continue to raise hackles.

“Yet another sign post of the decline in our civilization,” writes one commenter on the WSJ story this morning. “Government openly extorting companies and no individual responsibility anymore.”

As for the bank itself, it “didn’t admit or deny wrongdoing” while forking over the refunds and killing all the products in question, Andriotis and Rexrode report.