Citizens Bank fined $9 million for mismanaging fraud complaints


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A Citizens Bank branch in New York, on Friday, March 24, 2023.
Alex Kent | Bloomberg | Getty Images

WASHINGTON — The U.S. Consumer Financial Protection Bureau has issued a $9 million fine against one of the largest consumer banks in the country for violating federal consumer financial law and failing to properly process credit card disputes, according to a judgment released Tuesday.

The agency resolved its 2020 lawsuit against Rhode Island-based Citizens Bank for violating the Truth in Lending Act, which protects consumers against unfair credit billing and credit card practices. The CFPB said in its suit that the bank automatically denied fraud claims and billing error notices in certain circumstances.

In addition, Citizens neglected to fully refund charges and fees, and the bank failed to issue mandatory acknowledgement letters and denial notices in response to billing errors, according to the lawsuit.

“Federal law provides important rights to credit cardholders when disputing transactions and resolving billing errors,” CFPB Director Rohit Chopra said in a statement. “As outstanding credit card debt approaches $1 trillion, the CFPB will be closely watching the conduct of the credit card industry.”

Under TILA, credit card issuers are required to investigate all fraud claims and refund the amount in question plus any associated fees if unauthorized use is found. But Citizens automatically denied unauthorized use claims and billing error notices to customers who failed to return the bank’s fraud affidavit, according to the judgment.

Automatic denials also were issued when consumers refused or could not comply with a statute requiring notarization for the affidavit or the promise to appear in court, the suit said. In addition, CFPB said Citizens rerouted requests for referrals to credit counseling organizations from its designated toll-free line to general customer service or collections based on account status.

The malpractice began in at least 2010 and persisted into early 2016, according to the suit.

Citizens Bank noted that the issue involved a small subset of its credit card customers.

“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,” said Polly Klane, general counsel of Citizens.

Apart from the $9 million penalty to the CFPB’s victims relief fund, Citizens must ensure its credit card practices comply with the law and cease enacting the fraud affidavit, according to the release.

Citizens Bank is among the 15 largest consumer banks in the U.S. with branches and ATMs in 14 states and Washington, D.C. It is a subsidiary of Citizens Financial Group, which reported $222 billion in assets as of March 31.

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