Citi to Make Refunds for Overcharging Credit Card Customers
Citigroup (C – Free Report) plans to refund about $330 million to its credit card customers by the latter half of this year, after having confessed to charging higher interest rates to some of the defaulters, since 2011.
Per the Credit Card Accountability Responsibility and Disclosure Act of 2009, credit card issuing companies are required to review the accounts of customers whose interest rates had risen after a missed payment or bounced checks. The companies are to determine whether the customer has resumed making timely payments or has displayed some other creditworthy behavior.
On being satisfied of the customer’s financial standing, the rates are supposed to be lowered.
In one such review, Citigroup discovered to have kept overcharging about 1.75 million accounts. The bank said to have found flaws in the methodology it used to calculate the reduced rates in some accounts.
Majority of the affected accounts witnessed smaller rate cuts than they were eligible to, while the rest did not get the reduction at all. The New York based lender will be making average refunds of $190.
Also, the bank disclosed to have found no wrongdoings on part of its employees. Further, it apologized for having delayed in identifying the issue and promised to make amends at the earliest.
Previously in 2015, the financial regulators had made Citigroup pay nearly $700 million to credit card customers who were made to buy unnecessary add-on services. Per the Consumer Financial Protection Bureau’s findings, seven million accounts had been targets of “deceptive” marketing.
The recent disclosure is likely to have a little impact on the Citigroup’s reputation. Moreover, the company, with its global footprint and attractive core business, seems to be well poised for growth.
Shares of Citigroup have gained 28.4% over the past year, outperforming the 19.1% growth for the industry it belongs to.
The stock carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the same space are The PNC Financial Services Group (PNC – Free Report) , State Street Corporation (STT – Free Report) and Northern Trust Corporation (NTRS – Free Report) , each carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for PNC Financial has been revised 1.3% upward for the current year in the last 30 days. The company’s share price has increased 25.9% in the past year.
State Street has witnessed 5.1% upward earnings estimate revision for 2018 in the last 30 days. Its share price has surged 30.2% in the past year.
Northern Trust’s shares have gained 21.7% in a year and its earnings estimates for 2018 have moved up 1.5% in the last 30 days.
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