Between 1992 and 2003, Citibank operated an “automatic sweeping” program that would without notice remove positive balances from customers’ credit card accounts—mainly those of the poor and the recently deceased—and pocket the money. Now it’s paying back $14 million dollars to the affected customers, plus another $3.5 million in penalties to California, thanks to that state’s Attorney General.
From the Associated Press:
Citigroup’s “account sweeping program” automatically removed positive balances from customers’ credit card accounts, Attorney General Edmund G. Brown Jr. said. For instance, if a customer double-paid a bill by mistake or refunded a purchase for credit, that positive balance was then taken from the customer without notification, Brown said.
The news stories that announced the settlement last week don’t explain why the sweeping program was set up in the first place, or why it ran for so long. They do point out, however, that a whistleblower brought the program to the attention of an internal audit team in 2001, but that person was ignored and later fired.
One unnamed Citibank executive explains Citibank’s position pretty succintly in the AG’s press release:
In the words of a Citibank executive, “Stealing from our customers is a business decision, not a legal decision.” The same executive later said that the sweep program could not be stopped because it would reduce the executive bonus pool.
Citibank says it admits to no wrongdoing, although we’re not sure how you can characterize pocketing overpayments and credits for yourself as crime-free.
According to the settlement (PDF), Citibank must identify all affected accounts and mail a notice via first class mail to the account holder’s last known address, or to the person in charge of the customer’s estate. You’ll have to respond within 60 days of this notice, and then will be reimbursed the skimmed fees plus 10% interest. The bank has until June 1st, 2009 to refund the money.
“Citi pays $18M for questioned credit card practice” [Associated Press]
“Citibank Stole From 53,000 Customers” (Thanks to Claire!)
(Photo: Getty)
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“Stealing from our customers is a business decision, not a legal decision.”
Whatever prompted the decision, the use of the word “stealing” sounds like a confession to criminal activity.
@Hands: Damn, I want to change my screen name to Sipowicz.
And I hate to say this, but as much as I would agree with dissolving the company, what happens to all the shares and shareholders? Not all of them are rich ba$tards…
Note that this case came to light both because of Whistle Blower laws and those darned Trial Lawyers, the bugaboos of a certain political faction that will go nameless because I don’t want to rehash any tired arguments thereof. And won’t.
If corporations are legal entities similar to people, with rights, etc., which they are, we really need new laws that allow us to “jail” errant corporations. I’m unsure how: suspend their Corporate Charter for [x] period of time? Freeze their ability to pay shareholders for [x] period of time (harsh on the shareholders but BOY would it deliver a smack-down on their share price)… Something like that?
Likely this system waited and if there was no account activity in 3 months it took the money. Let’s just say they probably rationalized it this way: we’re not a bank, so if you don’t spend the money, consider it a cost of doing business.
Years ago, my mom had overpaid $800 on one of her credit cards (MasterCard) and it was practically a legal battle to get her money back from them. They’re predatory that way.
Sneaky stealing bastards, cancelling my Citi card. People who steal from the poor have no business in my book.
Citigroup is also responsible for Primerica, the “financial planning” group that tries to put your finances in the hands of people such as myself with just a couple of months of training. (and I have NO business handling other peoples complicated financial matters…) They called me and tried to get me “on board” after seeing my resume on monster looking for a photography/design position…
Here’s how I imagine it went down…
Citibank: Um, the 7-Eleven, right? You take a penny from the tray.
California Attorney General: From the crippled children? The poor and deceased?
Citibank: No, that’s the credit card jar. I’m talking about the tray, the pennies for our executives.
AT&T did this to me. Just ate my positive balance even though it was their fault I had a balance. They had a great euphemism for it. Needless to say, they did not give it back and I no longer use American Telephone and Telegraph – will they still help you with a telegraph?
Why did they stop in 2003? I guess Richard Pryor retired from programming.
Chase credit card has done this to me twice. I had a rewards card and after paying off the balance I ended up with a few dollars extra. I didn’t use the card anymore and after about three years they took the money and reduced my balance to $0. An automatic magazine subscription made a charge to this card again and I paid off the balance. I ended up with a few cents this time. After only a year they took the balance again. I did send this into the Consumerist several years back when it first happened but didn’t pursue it with Chase because it was only a few dollars total. Glad to hear Citibank got caught. Maybe Chase will too soon and I will get my money back.
Bear in mind that the executive stated that the money that was stolen went to increasing the executive bonus pool. In other words, the executives kept that stolen money for themselves. The penalties that are going to be repaid to the people who were stolen from will come out of the company’s coffers, not the executives. In other words, the executives stole the money and got off scott-free. This punishment isn’t even a punishment. The company is going to be the pariah for their blatant thievery.
This is a complete deception and lies. Each CEO and account excecutive
should have been imprisoned to 15 years in federal prison. Second, Citibank
should have undergone a thorough credit background and computer check by the
FBI to ensure no further criminal activity could have occurred. And last
Citibank should have been required to pay a $50 million dollar fine for
their actions. Citibank needs to made an example of so other banks do not
ever consider to do this unethical practice.
Lastly, Congress must legislate a bureau that can oversee these banks and
the ethics of their practices to protect the American public.
This is theft and in America theft is punishable under law.
Jail time for the executives who ran this scheme. It’s the only thing that works. If they had stolen from the company, they would see the inside of a jail, so why not this? That penalty doesn’t seem anywhere near high enough, unless it is coming from the pockets of those who participated in the theft.
On months that I don’t use my CC I always keep a small positive balance so that I still get a statement. It’s my money and any bank who stole it would be hearing from me, then the media and the police. How is it that this bank has any customers left?
Such deception. I am very shocked that this story is not in newspaper headlines and on CNN. How come they don’t publicize this kind of stuff to show consumers the real colors of these mischievous corporations who just care about profit and not their customers!
Does anyone know anything about a judgement against Citibank’s Citiassist loans where they apparently paid college financial guidance officers kick backs for the number of C.A. loans they issued? I know I read about this and I want to see if my wife’s college is on the list. I believe some debts were forgiven. Thank YOU