Citizens Bank to Pay $9 Million Penalty for Mishandling Credit Card Disputes and Fraud Claims

CFPB Settles Allegations Against Citizens Bank for Violating Consumer Financial Protection Laws | May 24, 2023

In a recent settlement, Citizens Bank has agreed to pay a $9 million civil money penalty following allegations of violating consumer financial protection laws. The Consumer Financial Protection Bureau (CFPB) accused the bank of mismanaging and inadequately responding to customers' credit card disputes and fraud claims. The settlement, if approved by the court, will mark a significant penalty for the bank's actions.

Citizens Bank, a prominent financial institution headquartered in Providence, Rhode Island, operates branches and ATMs across 14 states and the District of Columbia. As a subsidiary of Citizens Financial Group, it holds assets worth $222 billion and ranks among the top 15 consumer banks in the country.

The CFPB's lawsuit, initially filed in January 2020, highlighted two major violations by Citizens Bank related to the Truth in Lending Act and its implementing Regulation Z:

1. Improperly denying customer reports: The bank allegedly mishandled billing error notices and claims of unauthorized credit card use by burdening customers with unnecessary requirements. These additional hurdles were not mandated by the Truth in Lending Act. Furthermore, when unauthorized use and billing errors occurred, the bank failed to fully refund finance charges or fees owed to customers, neglecting their rightful reimbursement.
2. Failing to provide required documents and referrals: Citizens Bank did not provide crucial acknowledgment and denial notices to individuals who submitted billing error notices, depriving them of the necessary updates on their disputes. Additionally, the bank failed to disclose mandatory credit counseling information to customers calling their toll-free number, often redirecting them to the collections department instead.

As part of the settlement, Citizens Bank has agreed to undertake the following actions:

1. Rectifying credit card practices: The bank must ensure that the handling, treatment, and resolution of billing error notices and unauthorized use claims align with the law. Employees are prohibited from demanding customers to provide fraud affidavits signed under penalty of perjury. Additionally, Citizens Bank is obliged to refund any fees or amounts owed to customers for valid billing error notices and unauthorized use claims, starting from the date of the error or unauthorized use.
2. Paying a $9 million fine: Upon court approval, Citizens Bank will be required to pay a $9 million civil money penalty to the CFPB's victims relief fund, serving as a significant consequence for their violations.

The CFPB, established to safeguard consumer interests in financial markets, holds the authority to take action against institutions that violate consumer financial protection laws. This settlement with Citizens Bank underscores the CFPB's commitment to ensuring compliance with regulations and addressing violations within the credit card industry.

As outstanding credit card debt in the United States approaches $1 trillion, the CFPB remains vigilant in monitoring the conduct of credit card issuers, aiming to uphold the rights and protections of credit cardholders in dispute resolution and fraud claims.

For more information, visit the CFPB's official website at www.consumerfinance.gov.