Citizens Bank will pay $9 million to settle Consumer Financial Protection Bureau allegations that the Providence, Rhode Island-based lender improperly managed customers’ credit card disputes and fraud claims, the agency said Tuesday.

The penalty stems from a January 2020 lawsuit the bureau filed against the bank, alleging it improperly denied customer reports of fraud and errors and failed to fully reimburse users, in some cases.

“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,” the bank’s general counsel, Polly Klane, said in a statement.

Klane added that the “operational errors” the bank disclosed in 2015 affected “a very small subset” of customers — roughly 25,000.

As part of the settlement, Citizens must ensure its treatment, handling and resolution of billing error notices and claims of unauthorized credit-card use comply with the Truth in Lending Act. 

Specifically, the CFPB ordered the bank to prohibit its employees from requiring customers to provide a fraud affidavit signed under penalty of perjury to support a credit card claim. The bureau labeled that practice as “unnecessary and burdensome.”

The bank must also ensure it refunds any fees or other amounts, calculated from the date of the error or unauthorized use. The CFPB accused Citizens of “sometimes not refunding all finance charges or fees owed to customers” when unauthorized use and billing errors occurred.

Additionally, the bureau said, the bank failed to give some customers proper acknowledgment and denial notices to inform them their disputes had been received or, in some cases, denied. Citizens, on some occasions, routed some customers to the bank’s collections department rather than providing them with credit counseling information, the agency said.

“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.”

Citizens, in its statement, said its remediation efforts were completed shortly after the issues were discovered and “exceeded all obligations to make customers whole.”

“We remain proud of our commitment to transparency, our rigorous compliance programs, and our consistent effort to treat customers fairly and operate responsibly,” Klane said Tuesday.

By Dan Ennis on May 24, 2023
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