Citibank objects to AG's comments over account skimming

Legal News Line Aug. 26, 2008, 1:28pm

Jerry Brown (D)

SAN FRANCISCO, Calif. (Legal Newsline)-Concluding a three-year investigation into Citibank, Attorney General Jerry Brown announced a settlement today for more than $18 million.

Under terms of the settlement, California will receive $3.5 million in damages and civil penalties from Citibank. The company will also repay more than $14 million to customers with 10 percent interest. Of the $14 million, $1.6 million was taken from California residents, Brown said.

"The company knowingly stole from its customers," Brown said, "mostly poor people and the recently deceased."

According to a press release issued by the attorney general's office Tuesday, Citibank used a computerized process to automatically remove positive balances from credit-card customers.

"An account could show a credit balance," the report states, "if a customer double-paid a bill or returned a purchase for credit. The credit sweeps were done without notifying the customer and without regard for whether the customer had any unpaid balances or other charges owed to Citibank."

Citibank conducted these sweeps from 1992 to 2003 and impacted more than 53 customers across the country.

"All of the affected accounts were in recovery status," the press release states, "which includes accounts of customers who have died, sought bankruptcy protection or been the target of litigation or other collection efforts by Citibank."

On Tuesday, Citibank said it does not agree with the attorney general's comments about its practices.

"We take issue with the state's characterization of our conduct and the parties' voluntary settlement," Samuel Wang, Citibank vice president of public affairs, told Legal Newsline on Tuesday.

Brown said a whistleblower within the company first uncovered the scam in 2001 and brought it to his superiors, who "buried the information and continued the illegal practice."

Wang said the company voluntarily stopped the practice in 2003, two years before the California Attorney General's office began its investigation.

"We of course are committed to treating our customers fairly," Wang said. "We have been refunding credit balances voluntarily to customers nationwide. This agreement affirms our actions, and we are continuing to make full refunds to all affected customers."

In addition to the money Citibank will repay its customers and to California, the terms of the settlement include a permanent injunction against re-initiating the sweeps in the future, and agreeing to have an independent auditor review Citibank's work after the refund process is complete.

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