Citizens Bank, one of the largest US regional banks, will pay a $9m civil penalty to resolve charges it mismanaged customers’ credit card disputes and fraud claims, the Consumer Financial Protection Bureau (CFPB) said on Tuesday.

“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 $1trn, the CFPB will be closely watching the conduct of the credit card industry.”

Truth in Lending Act

The settlement stems from a 2020 lawsuit against the bank in which the CFPB alleges that Citizens Bank violated the Truth in Lending Act.

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 refund the error or fraud amount when the claim is deemed valid.

More specifically, the CFPB said Citizens 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.

The bank also failed to provide certain individuals who submitted billing error notices with required acknowledgment and denial notices. These notices would have informed them that their disputes have been received and, if applicable to a person’s case, that the dispute was denied.

When customers called the bank’s toll-free number that was labeled as one for credit counseling information purposes, the bank did not disclose the required credit counseling information sought; instead, it routed some individuals to the bank’s collections department, the CFPB said.

Enforcement and remediation required

The settlement requires approval by a federal judge in Providence, RI, where Citizens is based. Following such court action, the stipulated judgment and order will 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.
• Refund any fees: The bank must 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 $9m fine: The bank will pay a $9m penalty to the CFPB’s victims relief fund. 

Statement from the bank

In a public statement, the bank said that in 2015, Citizens self-identified operational errors that may have impacted approximately 2%, or about 25,000, of Citizens’ approximately 1.2 million 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.