CFPB sues Citizens over card fraud claims, but bank pledges to fight

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The Consumer Financial Protection Bureau filed a lawsuit Thursday against Citizens Bank alleging it failed to resolve credit card disputes and miscalculated refunds to consumers with fraud claims.

The agency's complaint against the $164.6 billion-asset Citizens, of Providence, R.I., says the bank denied fraud claims related to consumer credit cards. The lawsuit also alleges that Citizens failed to consistently refund all charges, including finance charges and fees, when resolving billing disputes.

The lawsuit covers activities that date back to at least 2010 through February 2016.

“While servicing credit cards, Citizens failed to reasonably investigate and appropriately resolve billing error notices and claims of unauthorized use, failed to properly credit consumers’ accounts when unauthorized use and billing errors occurred, and failed to provide credit counseling disclosures to consumers as required by Regulation Z,” the bureau said.

The bureau’s complaint seeks an injunction from future violations, redress to consumers and unspecified civil money penalties including additional relief.

Citizens made clear that it plans to fight the agency's action.

“We are puzzled and disappointed by the CFPB’s stance with respect to these long-resolved issues," said Stephen T. Gannon, Citizens' general counsel, said in a statement released by the bank. "Citizens fully addressed these matters within months of self-identifying, self-reporting and voluntarily remediating them more than four years ago."

Gannon added that the bureau's demands "are wholly disproportionate to the issues at hand, and we strongly believe that the Bureau’s claims are unwarranted on both the facts and the law."

"We intend to vigorously contest the CFPB’s claims and are highly confident in the merits of our position,” he said.

The CFPB filed the 12-page lawsuit in U.S. District Court for the District of Rhode Island alleging violations of the Truth in Lending Act, Regulation Z and the CARD Act.

The CFPB said that in many cases Citizens miscalculated amounts that should have been refunded to customers who claimed that they were the victims of fraud. Those included finance charges and fees.

It further alleged that from at least 2010 through February 2016, Citizens did not consistently send each consumer claiming fraud a written acknowledgment of a billing error claim within 30 days of the bank’s receipt of the claim, as the bank is required to do. In cases where the bank denied such a claim, Citizens allegedly failed to send consumers a written denial within two complete billing cycles.

Citizens also failed for years to provide credit counseling referrals to consumers who called a toll-free number, the agency said.

“The Bank had no policies or procedures in place to ensure that its employees provided credit counseling information when consumers called the designated phone line,” the CFPB said in the lawsuit.

Despite the CFPB's request for consumer redress, the bank said in its statement that it took swift action years ago. Citizens said it has voluntarily
paid approximately $750,000 in remediation to a far broader set of customers than required by applicable rules.

There is “no harm remaining to be remediated,” Citizens said.

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Credit cards Enforcement actions Consumer lending TILA Card fraud CFPB Citizens Bank