Government actions against credit card issuers seem to have emboldened dissatisfied consumers and class action lawyers, who have been taking matters into their own hands by filing suits against the companies.

This month Citigroup Inc. agreed to pay $45 million to settle a consumer class action. The suit accused Citi's credit card unit of improperly assessing finance charges. Citi did not take blame for the problem but said it settled to "avoid the expense of litigation." And on July 7, Direct Merchants Credit Card Bank NA, the card subsidiary of Metris Cos., was slapped with a lawsuit that makes similar allegations about excessive fees. That suit is seeking class action status.

Credit card experts say this type of lawsuit may grow more prevalent now that consumers and class action lawyers smell blood in the water. The Justice Department's ongoing lawsuit against Visa and MasterCard, which is scheduled to resume Tuesday in U.S. District Court in Manhattan, has called national attention to card industry practices. And Providian Financial Corp.'s agreement to settle a government probe for $300 million made headlines everywhere.

"As long as the plaintiffs' class-action bar senses that there is money out there, you'll see other lawsuits," said Anita Boomstein, an attorney in the New York law firm Hughes, Hubbard & Reed.

Citigroup's $45 million hit may be the biggest private action settlement to date, experts say. While Citi is not alone in paying a large sum to make its legal troubles go away, some industry executives worry about the precedent that has been set.

"The trial bar has set its sights on the bank card industry, and it is increasingly viewing it as a treasure trove," said Duncan MacDonald, a former general counsel of Citigroup who is now a consultant. Mr. MacDonald said the card industry invited this trouble two years ago when it began sending notices to consumers changing the terms and prices of their cards.

PaineWebber analyst Gary Gordon said, "A lot of the reason there are complaints like this is because the industry is so competitive." Credit card companies are increasingly relying on fee income - selling ancillary products, and penalizing customers for the slightest infraction - to make up for the money they lose by peddling products with low interest rates and no annual fee.

In the Citigroup lawsuit, Citibank South Dakota NA and Universal Bank NA (which issued the AT&T credit card portfolio that Citibank purchased several years ago) were accused of improperly crediting the payments of some customers on the day the payments were received.

Because of the way the payments were handled, they were deemed late, and the cardholders were assessed a finance charge. Sometimes the finance charges led Citi to raise the cardholders' interest rates.

The suit was filed in December in U.S. District Court in the Central District of California. This month Citigroup began notifying cardholders about the lawsuit and the plan to settle it.

According to these notices, Citibank is establishing an $18 million settlement fund. Another $18 million is earmarked for the expenses involved in distributing the refunds. And $9 million will be spent on attorneys' fees.

Citigroup said it would change the cutoff time for crediting consumer card payments received on a business day from 10 a.m. to 1 p.m.

A statement issued by Citibank's public relations office says:

"Citibank believes that it is in the best interest of our cardmembers and our shareholders to settle this case, which focuses on technical questions relating to the 10 a.m. cutoff time for credit card payments to be posted as of that day. This settlement enables us to avoid the expense of litigation and brings the benefits of a settlement, including improved disclosures and educational material as well as refunds, to our cardmembers."

To get the refund Citi customers must fill out a claim form. Even then, most people will get only about $1.

The lawsuit filed against Metris this month in a district court in Minnesota accuses the St. Louis Park, Minn., card lender of charging cardholders for services they did not request and of unfairly assessing finance, late, and over-the-limit fees, among other things.

According to the lawsuit, Metris increases "the likelihood that cardholders' payments will either be late, and thus charged a late payment fee in addition to greater finance charges; or simply be delayed, and therefore will incur greater finance charges." Metris "routinely designate(s) Saturdays, Sundays and federal holidays as payment due dates when, in accordance with its standard cardholder agreement, defendants do not accept credit payments as received on these days," the suit says.

This year alone, it alleges, 31% of Metris' payment due dates are Saturdays, Sundays, or holidays.

The other major complaint against Metris involves its marketing of so-called fee-based services, such as Fraud Alert, PurchaseShield, and Quality Jewelry Care. Metris routinely enrolls cardholders in these services "without their express consent or first providing a complete description of these services, failing to honor 'money back' guarantees, and failing to give cardholders full refunds upon receipt of timely cancellation requests," it is alleged.

A Metris spokesman, Michael Smith, said Metris would not comment on pending litigation.

Keelyn M. Friesen, an attorney for the plaintiffs, said her Minneapolis law firm, Zimmerman Reed, is considering suing other card companies. "We are finding that these practices are not limited to Providian and Metris," she said.

Ms. Friesen's law firm is also involved in one of the half-dozen pending consumer lawsuits against Providian. Those lawsuits were combined last fall for the purposes of pretrial discovery, she said.

Not every lawsuit results in a settlement. First USA seems to be defending itself handily in U.S. District Court for the Northern District of Texas, where a judge dismissed a consumer lawsuit seeking class action status. That lawsuit focusing on First USA's late fees is now wending its way through the appeals courts.

The maelstrom over what consumer groups say is an unreasonable uptick in punitive fees started about a year ago, when Providian and First USA, the credit card subsidiary of Bank One Corp., were publicly accused of being too greedy in collecting various fees.

Investigations by the Office of the Comptroller of the Currency and some state attorneys general started, and eventually Providian and First USA were accused of charging late fees to customers who had paid their card bills on time. In Providian's case, the accusations included deceptive marketing practices and a policy of charging customers for services, such as credit protection, that they had not asked for.

Providian blamed its late-fee problem on a computer glitch, and First USA said it might have "inadvertently" posted erroneous late fees to cardholder accounts between November 1998 and March 1999.

After the news broke about the investigations, consumers filed at least six lawsuits against these companies, most of them aimed at Providian. In the third quarter of last year Providian took a $20 million charge to refund the late fees it had wrongly charged customers. This June, Providian agreed to settle with government regulators, promising to pay a whopping $300 million to atone for its business practices.

The threat of more litigation appears to be affecting card lenders' marketing efforts. Michael Auriemma, president of Auriemma Consulting Group in Westbury, N.Y., said that within the past six weeks "we have seen some card solicitations saying: We have eliminated late and over-the-limit fees." Among the card lenders doing this, Mr. Auriemma said, are Chase Manhattan Bank, Wachovia Bank, and First USA.

Robert McKinley, president of Inc., a consulting company and news service for the card industry, said such lawsuits would likely be limited to the top card lenders, because "they are the ones with deep pockets."

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