On May 23, 2023, the Consumer Financial Protection Bureau (CFPB) reached a settlement to resolve allegations that Citizens Bank violated consumer financial protection laws and rules that protect individuals when they dispute credit card transactions. The CFPB alleges that Citizens Bank failed to properly manage and respond to customers’ credit card disputes and fraud claims. If entered by the court, the order, among other things, would require Citizens Bank to pay a $9 million civil money penalty.
“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 $1 trillion, the CFPB will be closely watching the conduct of the credit card industry.”
Citizens Bank is a large bank headquartered in Providence, Rhode Island, with branches and ATMs in 14 states and the District of Columbia. Citizens Bank is a subsidiary of Citizens Financial Group (NYSE: CFG), which reported $222 billion in assets as of March 31, 2023, and is one of the 15 largest consumer banks in the country. The CFPB originally sued Citizens Bank in January 2020.
Federal law protects individuals from credit card billing errors and fraud. 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, when claims are valid, refund the error or fraud amount.
In the 2020 lawsuit, the CFPB alleges that Citizens Bank violated the Truth in Lending Act and its implementing Regulation Z by:
- Improperly denying customer reports of fraud and errors and failing to provide refunds: The 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.
- Failing to provide required documents and referrals: The bank did not provide certain individuals who submitted billing error notices with required acknowledgment and denial notices, which inform them that their disputes have been received and, if applicable to a person’s case, that the dispute was denied. The bank also did not disclose required credit counseling information to individuals who called the bank’s toll-free number designated for that purpose, and instead routed some individuals to the bank’s collections department.
Under the Consumer Financial Protection Act, the CFPB has the authority to take action against institutions violating consumer financial protection laws. If entered by the court, the stipulated judgment and order would 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. The bank must also 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 $9 million fine: The bank will pay a $9 million penalty to the CFPB’s victims relief fund.
Read the proposed stipulated judgment and order.
Learn more about the CFPB’s credit card resources.
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