WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) reached a settlement to resolve allegations that Citizens Bank violated consumer financial protection laws and rules that protect individuals when they dispute credit card transactions. The CFPB alleges that Citizens Bank failed to properly manage and respond to customers’ credit card disputes and fraud claims. If entered by the court, the order, among other things, would require Citizens Bank to pay a $9 million civil money penalty.
“Federal law provides important rights to credit cardholders when disputing transactions and resolving billing errors,” said CFPB Director Rohit Chopra. “As outstanding credit card debt approaches $1 trillion, the CFPB will be closely watching the conduct of the credit card industry.”
Citizens Bank is a large bank headquartered in Providence, Rhode Island, with branches and ATMs in 14 states and the District of Columbia. Citizens Bank is a subsidiary of Citizens Financial Group (NYSE:CFG), which reported $222 billion in assets as of March 31, 2023, and is one of the 15 largest consumer banks in the country. The CFPB originally sued Citizens Bank in January 2020.
Federal law protects individuals from credit card billing errors and fraud. The Truth in Lending Act and the rules that implement it lay out specific steps that individuals must take to report credit card disputes and fraud claims. If a person reports a billing error or fraud, the credit card issuer is required to investigate the allegations, send certain notifications to the individual, and, when claims are valid, refund the error or fraud amount.
In the 2020 lawsuit, the CFPB alleges that Citizens Bank violated the Truth in Lending Act and its implementing Regulation Z by:
- Improperly denying customer reports of fraud and errors and failing to provide refunds: The bank failed to reasonably investigate and resolve billing error notices and claims of unauthorized use by making customers jump through unnecessary and burdensome hoops, which are not required under the Truth in Lending Act, to report fraud. The bank also failed to fully credit customers’ accounts when unauthorized use and billing errors occurred by sometimes not refunding all finance charges or fees owed to customers.
- Failing to provide required documents and referrals: The bank did not provide certain individuals who submitted billing error notices with required acknowledgment and denial notices, which inform them that their disputes have been received and, if applicable to a person’s case, that the dispute was denied. The bank also did not disclose required credit counseling information to individuals who called the bank’s toll-free number designated for that purpose, and instead routed some individuals to the bank’s collections department.
Enforcement Action
Under the Consumer Financial Protection Act, the CFPB has the authority to take action against institutions violating consumer financial protection laws. If entered by the court, the stipulated judgment and order would require Citizens Bank to:
- Fix its credit card practices: Citizens Bank must ensure that the treatment, handling, and resolution of billing error notices and unauthorized use claims comply with the law, including prohibiting its employees from requiring customers to provide a fraud affidavit signed under penalty of perjury in support of a credit card claim. The bank must also ensure that it refunds any fees or other amounts, calculated from the date of the error or unauthorized use, in response to valid billing error notices and unauthorized use claims.
- Pay a $9 million fine: The bank will pay a $9 million penalty to the CFPB’s victims relief fund.
Read today’s proposed stipulated judgment and order.
Learn more about the CFPB’s credit card resources.
Learn more about frauds and scams.
Consumers can submit complaints about credit card servicing and other financial products and services by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).
Employees who believe their companies have violated federal consumer financial protection laws, including the Truth in Lending Act, are encouraged to send information about what they know to whistleblower@cfpb.gov. To learn more about reporting potential industry misconduct, visit the CFPB’s website.
The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces Federal consumer financial law and ensures that markets for consumer financial products are fair, transparent, and competitive. For more information, visit www.consumerfinance.gov.
FAQs
The CFPB also ordered Citizens Bank to pay a $9 million fine for failing to give refunds to consumers who reported fraud or billing errors, and ordered Citibank to pay $25.9 million for intentional, illegal discrimination against credit card applicants the bank identified as Armenian American.
What is the Citizens Bank controversy? ›
According to the EEOC's lawsuit, Citizens Bank refused to accommodate a call center employee after he developed an anxiety disorder and requested to be reassigned to a position that did not require him to field calls with aggravated customers over the phone.
What is the CFPB proposed rule for credit card late fees? ›
It will help consumers keep more of their money, and hold credit card companies to the original intent of the CARD Act. The rule requires large card companies to either charge a maximum late fee of $8, or justify a higher amount by demonstrating that they need to charge more to cover their actual collection costs.
What is the penalty for violating the CFPB? ›
For any violation of a law, rule, or final order or condition imposed in writing by the CFPB, a civil money penalty of up to $5,000 for each day during which such violation or failure to pay continues.
What are the new credit card laws for 2024? ›
Consumer Financial Protection Bureau Releases Final Rule on Credit Card Late Fees, with Overdraft Fees on Deck. On March 5, 2024, the Consumer Financial Protection Bureau (Bureau) announced the final rule governing late fees for consumer credit card payments, likely cutting the average fee from $32 to just $8.
Is the FDIC shutting down Citizens Bank? ›
On November 3, 2023, the Iowa Division of Banking (IDOB) closed Citizens Bank and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver.
What bank owns Citizens Bank? ›
By 1981, we had grown to 29 branches in Rhode Island with approximately $1.0 billion of assets. In 1988 we became a wholly-owned subsidiary of the RBS Group.
What is the new law on credit card debt? ›
The new restriction limits issuers to an $8 fee, unless they can prove they need to charge more to cover their actual collection costs. It applies only to large issuers that have more than one million open accounts, but the agency estimates that the rule will cover 95 percent of outstanding credit card balances.
Where do CFPB fines go? ›
Civil Penalty Fund
A civil money penalty is a fine that the government can issue for certain violations of consumer protection laws. Whenever we collect a civil money penalty through an enforcement action, the money is deposited into our victims relief fund, called the Civil Penalty Fund.
What is the maximum amount a credit card company can charge for late fees? ›
Credit card late fees, which currently average $32, will be capped at $8 under a new rule finalized by the Consumer Financial Protection Bureau (CFPB). The federal agency expects the change to save Americans billions of dollars annually.
In a lawsuit filed on December 30, 2021, in the United States District Court for the Southern District of California, against LendUp Loans, LLC the CFPB alleged that the defendant violated the Consumer Financial Protection Act of 2010 (CFPA) using deceptive acts and practices as well as its consent-order violations in ...
Do banks take CFPB complaints seriously? ›
The complaints may be vague and unsupported but banks have to take them seriously, he said. If the CFPB decides to take an enforcement action based on complaints, legal costs for banks defending action can be tens of millions of dollars a month.
Can the CFPB get your money back? ›
If you're having trouble with a credit card, you can submit a complaint to the CFPB online or by calling (855) 411-CFPB (2372). If you're not satisfied with the merchant's response, you may be able to dispute the charge with your credit card company and have the charge reversed. This is sometimes called a chargeback.
What is the 7 year rule on credit cards? ›
Most negative items should automatically fall off your credit reports seven years from the date of your first missed payment, at which point your credit score may start rising. But if you are otherwise using credit responsibly, your score may rebound to its starting point within three months to six years.
What is the golden rule of credit cards? ›
The golden rule of credit card use is to pay your balances in full each month. "My best advice is to use a credit card like a debit card — paying in full to avoid interest but taking advantage of credit cards' superior rewards programs and buyer protections," says Rossman.
Can a credit card come after you after 15 years? ›
In most cases, the statute of limitations for a debt will have passed after 10 years. This means a debt collector may still attempt to pursue it (and you technically do still owe it), but they can't typically take legal action against you.
Why did Citizens Bank collapse? ›
Citizens Bank's failure was a result of "significant loan losses" related to one industry, according to an Iowa Division of Banking (IDOB) news release.
Is Citizen bank going under? ›
On Friday, November 3, 2023, Citizens Bank was closed by the Iowa Division of Banking. The Federal Deposit Insurance Corporation (FDIC) was named Receiver.
Is Citizens Bank being taken over by another bank? ›
With a strong financial foundation and customer-focused approach, Iowa Trust assumed operational control of Citizens Bank on November 5, 2023.
Was Citizens Bank hacked? ›
Social media reports on Monday morning that Citizens Bank had a data breach, or that it was “hacked,” are not true, according to the financial institution, but some customers were the victims of “skimming.”
