CFPB Fines Bank $9M For Failing to Properly Manage Credit Card Disputes, Fraud Claims

The Consumer Financial Protection Bureau yesterday announced a $9 million settlement with Citizens Bank over a lawsuit that was filed in 2020 accusing the financial services giant of failing to properly manage disputes and fraud claims filed by the bank’s credit card customers. Along with paying the fine, the bank will also have to update its policies and procedures to prohibit employees from requiring customers to provide a fraud affidavit — filed under the penalty of perjury — when filing a credit card claim.

A copy of the proposed stipulated judgment and order can be accessed by clicking here.

The lawsuit accused the bank of violating the Truth in Lending Act by improperly denying customer reports of fraud and errors and failing to provide refunds and failing to provide required documents and referrals, while also routing some individuals who called the bank’s toll-free number dedicated for credit counseling to the bank’s collections department instead. Customers had to “jump through unnecessary and burdensome hoops” when reporting fraud to the bank, which are not required under TILA, the CFPB claimed.

“Federal law provides important rights to credit cardholders when disputing transactions and resolving billing errors,” said CFPB Director Rohit Chopra, 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 is prohibited from automatically denying billing error notices and claims of unauthorized use of cards if the customer fails to provide a fraud affidavit signed under penalty of perjury, from failing to credit reimbursable fees and finance charges to consumers’ accounts when unauthorized use and billing errors occur, from failing to provide consumers with required acknowledgement and denial notices upon receipt or resolution of billion error notices, and from failing to provide required credit counseling information to consumers who call the toll-free number dedicated for such purpose.

“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, in a statement that noted the errors impacted 2% of the bank’s customers and that the bank self-reported the errors back in 2015. “We remain proud of our commitment to transparency, our rigorous compliance programs, and our consistent effort to treat customers fairly and operate responsibly.”