One of the world’s largest credit card issuers, Citigroup Inc (NYSE:C), is to refund US$335mln to some of its customers whose annual percentage rates should have been lower.
Citi said it had miscalculated how much of a reduction in penalty rates was due for customers who had made six months’ worth of on-time repayments.
This is mandated by the CARD Act - a piece of legislation brought in almost a decade ago to protect bank customers from excessively high charges.
Before then, someone who missed just one payment could be saddled with a much higher APR for an indefinite, and often long, period of time.
1.75mln affected accounts
In Citi’s case, more than half of the 1.75mln affected accounts should have received a bigger cut, while the rest were entitled to a reduction but didn’t get one.
The lender discovered the flaws on its own and self-reported it to regulators, according to the filing, while it didn’t find any evidence of misconduct.
“Citi has semi-annually reviewed U.S. credit-card accounts that experienced an interest-rate increase to identify those eligible for a rate reduction,” spokeswoman Liz Fogarty said in a statement.
“A periodic internal review identified potential flaws in the methodology used to reevaluate interest rates on some credit-card accounts.”