Department Stores National Bank To Pay $23.8M For Charging Fees on Collection Accounts

As part of a larger Consumer Financial Protection Bureau (CFPB) enforcement action announced today against Citibank, N.A., Department Stores National Bank (a Citibank subsidiary) will pay $23.8 million for deceptively charging expedited payment fees to nearly 1.8 million consumer accounts during collection calls.

When collecting payment on delinquent retailer-affiliated credit card accounts, Citibank offered consumers the option to pay by phone using a checking account, so the payment would post to the account on the same day. There was a $14.95 fee associated with using this option. Citibank misled consumers by not disclosing the purpose of the expedited payment fee. It misrepresented the payment fee as a “processing” fee and did not explain that the fee was to post payment to the account on the same day it was made rather than a fee to allow payment. Citibank also failed to disclose other no-cost payment alternatives. The company charged the fee even though it was rarely in the consumer’s interest to pay the fee so that the payment would post on the same day.

The bulk of the enforcement action involved marketing and administration of credit card “add on” products and services. Citibank and its subsidiaries will pay $35 million in civil money penalties to the CFPB, and $700 million in total relief to consumers for the range of illegal practices identified. “We continue to uncover illegal credit card add-on practices that are costing unknowing consumers millions of dollars,” said CFPB Director Richard Cordray. “In our four years, this is the tenth action we’ve taken against companies in this space for deceiving consumers. We will remain on the lookout for similar conduct and will address it as we find it.”

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