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Citi Agrees With $335M Settlement for Refunds To Customers
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On Friday, as part of a settlement reached with regulators, Citigroup (C - Free Report) agreed to refund $335 million to its credit card customers holding 1.75 million customer accounts, after having confessed to charging higher interest rates to some of the defaulters, since 2011. Notably, the banking giant was not charged additional fine by the Consumer Financial Protection Bureau (CFPB), as the bank itself identified the issue and reported to CFPB in 2017.
Per Citigroup, the refunds averaged around $190 and the refund process will likely be completed by the end of this year. "Citi is pleased to have resolved the matter with the Bureau, and we reiterate our sincere apologies to our customers for not correcting these issues sooner,” the bank noted.
Background
Per the Credit Card Accountability Responsibility and Disclosure Act of 2009, credit card issuing companies are required to review accounts of customers whose interest rates had risen after a missed payment or bounced checks. The companies are to determine whether the customer has resumed making timely payments or has displayed some other creditworthy behavior. On being satisfied of the customer’s financial standing, the rates are supposed to be lowered.
In one such review, it was revealed that Citigroup had kept overcharging about 1.75 million accounts. A number of flaws were discovered in the methodology which was used to calculate the reduced rates in some accounts.
Further, majority of the affected accounts witnessed smaller rate cuts than they were eligible to, while the rest did not get the reduction at all. Also, the bank had reported to have found no wrongdoings on part of its employees.
Previously in 2015, financial regulators had made Citigroup pay nearly $700 million to credit card customers who were made to buy unnecessary add-on services.
Conclusion
Banks across the globe have been facing increasing scrutiny for their business practices. Many of these firms have paid billions of dollars as fines and compensation to settle lawsuits and probes. Many investors have lost their hard-earned money as a result of such business malpractices. Encouragingly, such settlements help restore investors’ confidence in banks and their operations.
Shares of Citigroup have lost around 10.3% over the past six months compared with the nearly 6% decline recorded by the industry. The stock carries a Zacks Rank #3 (Hold).
Cullen/Frost Bankers, Inc. (CFR - Free Report) has been witnessing upward estimate revisions for the last 30 days. Also, the company’s shares have risen nearly 12.9% over the past year. It holds a Zacks Rank #2, at present.
Lakeland Financial Corporation (LKFN - Free Report) has been witnessing upward estimate revisions for the last 30 days. In a year’s time, this Zacks #2 Ranked company’s share price has been up more than 2.4%.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Citi Agrees With $335M Settlement for Refunds To Customers
On Friday, as part of a settlement reached with regulators, Citigroup (C - Free Report) agreed to refund $335 million to its credit card customers holding 1.75 million customer accounts, after having confessed to charging higher interest rates to some of the defaulters, since 2011. Notably, the banking giant was not charged additional fine by the Consumer Financial Protection Bureau (CFPB), as the bank itself identified the issue and reported to CFPB in 2017.
Per Citigroup, the refunds averaged around $190 and the refund process will likely be completed by the end of this year. "Citi is pleased to have resolved the matter with the Bureau, and we reiterate our sincere apologies to our customers for not correcting these issues sooner,” the bank noted.
Background
Per the Credit Card Accountability Responsibility and Disclosure Act of 2009, credit card issuing companies are required to review accounts of customers whose interest rates had risen after a missed payment or bounced checks. The companies are to determine whether the customer has resumed making timely payments or has displayed some other creditworthy behavior. On being satisfied of the customer’s financial standing, the rates are supposed to be lowered.
In one such review, it was revealed that Citigroup had kept overcharging about 1.75 million accounts. A number of flaws were discovered in the methodology which was used to calculate the reduced rates in some accounts.
Further, majority of the affected accounts witnessed smaller rate cuts than they were eligible to, while the rest did not get the reduction at all. Also, the bank had reported to have found no wrongdoings on part of its employees.
Previously in 2015, financial regulators had made Citigroup pay nearly $700 million to credit card customers who were made to buy unnecessary add-on services.
Conclusion
Banks across the globe have been facing increasing scrutiny for their business practices. Many of these firms have paid billions of dollars as fines and compensation to settle lawsuits and probes. Many investors have lost their hard-earned money as a result of such business malpractices. Encouragingly, such settlements help restore investors’ confidence in banks and their operations.
Shares of Citigroup have lost around 10.3% over the past six months compared with the nearly 6% decline recorded by the industry. The stock carries a Zacks Rank #3 (Hold).
Stocks to Consider
M&T Bank Corporation (MTB - Free Report) has been witnessing upward estimate revisions for the last 30 days. Additionally, the stock has jumped more than 3.6% in the past year. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cullen/Frost Bankers, Inc. (CFR - Free Report) has been witnessing upward estimate revisions for the last 30 days. Also, the company’s shares have risen nearly 12.9% over the past year. It holds a Zacks Rank #2, at present.
Lakeland Financial Corporation (LKFN - Free Report) has been witnessing upward estimate revisions for the last 30 days. In a year’s time, this Zacks #2 Ranked company’s share price has been up more than 2.4%.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>