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Citizens Financial (CFG) Faces $9M Fine for Credit Card Disputes

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Citizens Financial Group (CFG - Free Report) has been levied a civil penalty of $9 million by Consumer Financial Protection Bureau (“CFPB”) to resolve charges against the bank regarding its mismanaged credit card disputes and fraud claims.

Citizens Financial has been accused of failing to reasonably investigate and resolve billing error notices and claims of unauthorized use of credit cards. Further, the bank, in certain cases, has not refunded all the fees owed to the customers after it had acknowledged the abovementioned failure.

CFG has also failed to provide acknowledgments and denial notices to customers on the receipts of billing error notices. These are relevant for keeping customers informed about the progress of their requests.

With these failures, the bank has violated consumer financial protection laws. Hence, CFPB has instructed CFG to ensure proper treatment of billing error notices and unauthorized use claims, which must be in compliance with laws and regulations. Also, it is required to refund the entire amount as calculated on the date of error. These will be accompanied by the civil penalty mentioned above.

The general counsel of Citizens Financial said, “While Citizens continues to disagree with the CFPB’s stance with respect to these long-resolved issues, which were self-identified and voluntarily addressed years ago, we are pleased to put this matter behind us.”

As a result of the settlement, CFG’s litigation expenses are expected to rise for the period. This coupled with elevated costs due to franchise expansion, investments in newer technologies and building fee income capabilities are likely to limit bottom-line growth. Nonetheless, focus on revenues and efficiency initiatives, and solid balance-sheet growth are expected to provide some relief.

Over the past six months, shares of CFG have declined 33.5% compared with the industry’s fall of 32.8%.

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Currently, CFG carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Financial Misconduct by Other Firms

The Goldman Sachs Group, Inc.’s (GS - Free Report) European unit — Goldman Sachs Bank Europe SE — was recently fined an administrative penalty of €6.63 million by the European Central Bank (“ECB”) for credit risk reporting errors and miscalculating risk-weighted assets (RWAs).

Particularly, ECB said that Goldman misclassified corporate exposures and applied a lower risk weight. With this, GS underreported the credit risks associated with RWAs for eight straight quarters from 2019 to 2021.

Wells Fargo & Company (WFC - Free Report) agreed to pay $1 billion for overstating its progress on resolving the 2016 fake account scandal, and thereby defrauding shareholders.

Since 2018, WFC has been under consent orders from Federal Reserve and two other financial regulators to improve its governance and oversight.

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