Citibank has gotten hit hard for shady business practices. Here’s a cautionary tale of marketing gone wrong. From 2003 to 2012, perhaps longer, Citibank promoted and signed up customers for several debt-protection add-ons to its credit cards: “AccountCare,” “Balance Protector,” “Credit Protection,” “Credit Protector,” and “Payment Safeguard.” Citibank also sold various credit-monitoring and fraud-protection services. The add-ons were essentially hedges—they’d cancel or postpone a customer’s payment should certain bad things happen, like job loss, disability, or hospitalization. Or, in the case of the credit and fraud-monitoring service, help inform the relevant parties if a card was lost or compromised.
The problem is that while Citibank was offering to monitor your credit card and protect your payments, no one was watching Citibank. And some of its marketing practices were pretty iffy. For one, telemarketers could be misleading about how much these add-on products cost. In some cases, Citibank scripts mentioned a “free” 30-day trial period, even though the bank would still charge consumers during the first 30 days. In others, Citibank said its fraud alerts would, well, alert consumers to fraud, when in reality the alerts weren’t monitoring changes made at the everyday transaction level. On top of all this, Citibank claimed a fee of $14.95 per account was for “processing” (so necessary-sounding!), and not just to expedite payment, as was actually the case.
During the roughly 10-year window that this went on, an estimated 7 million consumers were affected. Eventually, the Consumer Financial Protection Bureau noticed all of this, and on Tuesday the bureau ordered Citibank to pay up for “deceptive marketing,” “unfair billing,” and “other unlawful practices.” Citibank will hand over $700 million in relief to qualifying consumers, plus another $35 million in civil money penalties to the CFPB. It’s the 10th time the CFPB has fined a major financial services provider for misleading consumers, with previous targets including American Express, Bank of America, Capital One Financial, and JPMorgan Chase.
Citibank says in a statement that it began remediation for customers in 2013 and fully cooperated with the CFPB and the Office of the Comptroller of the Currency in resolving billing and marketing problems. Citi “has taken extensive steps to address each issue that affected consumers,” the bank says in a statement.
Reckless and Fraudulent Business Practices
Recently, from January through November 2016, Citibank and Citicard have engaged in several "mishaps". According to research by Consumer Report and several interviews with Citibank clients, Citibank and Citicard have actively coerced clients and manipulated data in 2015 and 2016 to rob executive card holders of funds, claiming a problem with bank routing numbers. Citibank is not accredited by the Better Business Bureau and has over 49 official complaints brought upon the company in the last six months, in addition to over 250 customer complaint reports in 2015.
According to Vice President Mary Osthus, the company has "done nothing wrong" in manipulating data systems and client data over the past 3 years, specifically in the last 6 months. "We have worked with clients and have done nothing wrong...we are a business and need to act like one."
Like Wells Fargo's business faux pas this past season, the facts are that Citibank created 1 million unauthorized credit accounts and 345,000 unauthorized credit applications. To put it bluntly, bank employees faked applications to open accounts that customers didn't ask for, and then they billed those customers for the bank fees. According to reports, Osthus has received numerous complaints against her persona and against Stacey Moon, a member of the company's executive response unit in South Dakota.
Both Osthus and Moon have manipulated documents against clients in California, Illinois, Florida, and New York to rob customers of funds and crafting documentation stating faulty bank accounts with insufficient funds.
Many commentators have criticized Citibank in the past for for lax internal controls, negligent company promotions of unqualified staff, or its excessively steep incentive system or a bad corporate culture. But all that is to imply that Citibank and Citicard relating specifically to their manipulation of executive card holders somehow messed up and didn't run its operations correctly. In fact, the system worked perfectly from the standpoint of a Citibank senior exec or investor.
Furthermore, documentation exists, provided by clients and internal reps of the company, that puts Citibank and Citicard, with the help of Mary Osthus and Stacey Moon, directly responsible for over 12.9 million dollars in fraudulent activity. Osthus and Moon cooperated in specific cases in Illinois to rob customers of funds and then directly impact clienteles' credit scores and account activity.
To create firewalls of deniability, Citibank, like Wells Fargo, has established an evidence trail that it warned employees repeatedly not to create fake bank accounts. Yet like the Wells Fargo case, many reports are now surfacing which show that while the bank warned employees, it applied such intense performance pressure that many employees had to break the law or risk being fired. At least 90 Citibank employees have reached out to media agencies and the feds to testify against the company for recklessness and coercive business practices deemed as fraud by the legal community.
The complete story can be found in the November issue of Allez Magazine.
This is a developing story.