NEW YORK (Reuters) - Citigroup Inc (C.N) agreed to pay nearly $18 million in refunds and fines to settle accusations by California Attorney General Jerry Brown that it wrongly took funds from the accounts of credit card customers.
The settlement calls for the largest U.S. bank by assets to pay more than $14 million of restitution to roughly 53,000 people nationwide, and to pay interest at a 10 percent rate to affected California customers, Brown said. Citigroup will also pay California $3.5 million of damages and civil fines.
Brown said a three-year investigation found that Citigroup from 1992 to 2003 employed an improper computerized “sweep” feature to move positive balances from card accounts into the bank’s general fund, without telling cardholders.
The attorney general said the affected accounts were in “recovery” status, including accounts of customers who had died, sought bankruptcy protection or were the target of litigation or collection efforts by the New York-based bank.
Brown said accounts could show credit balances if customers paid bills twice by mistake, or returned purchases for credit.
“The company knowingly stole from its customers, mostly poor people and the recently deceased, when it designed and implemented the sweeps,” Brown said in a statement. “When a whistleblower uncovered the scam and brought it to his superiors, they buried the information and continued the illegal practice.” He said the whistleblower, a Citibank employee, notified superiors of the practice in July 2001.
Citigroup said in a statement it voluntarily stopped the sweep process in 2003, and has begun making full refunds.
“The Attorney General’s characterization of our conduct and the parties’ voluntary settlement is not accurate,” it said. “We of course are committed to treating our customers fairly.”
In late afternoon trading, Citigroup shares were up 19 cents at $17.80 on the New York Stock Exchange.
Editing by Braden Reddall