Citigroup Inc, one of the world’s largest credit-card issuers, said it is to refund US$335 million to US customers whose annual percentage rate (APR) should have been lower.
The lender determined that a method it was using to calculate APRs did not properly reflect the full benefit that customers should have received for good behavior, such as paying on time, the New York-based bank said on Friday in a securities filing that disclosed the issue and the total cost.
Citi is reviewing accounts and plans to have refund checks in the mail by the second half of the year, it said.
The Credit Card Accountability Responsibility and Disclosure Act of 2009 requires lenders to periodically review accounts whose APR has been raised to see whether subsequent good behavior makes them eligible for a rate reduction.
From 2011 to last year, the bank delivered US$3 billion in savings through such reviews. That was about 90 percent of what customers should have received.
“Citi has semi-annually reviewed US credit card accounts that experienced an interest rate increase to identify those eligible for a rate reduction,” spokeswoman Liz Fogarty said in a statement. “A periodic internal review identified potential flaws in the methodology used to re-evaluate interest rates on some credit card accounts.”
The issue is a setback for Citigroup chief executive officer Mike Corbat, who has tied some of the bank’s future growth to expanding its credit card operation.
In 2015, the bank was ordered to pay US$700 million to customers and fined US$70 million over illegal practices related to its marketing of card add-on products.
In the latest case, Citigroup is to issue refunds for 1.75 million affected accounts, the bank said.
That works out to an average of about US$190 per account, including interest owed.
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