Big Banks Are Turning On Customers: How to Protect Yourself

Jewel Samad/AFP/Getty Images

Jewel Samad/AFP/Getty Images

You’re a responsible credit card user. You don’t rack up insurmountable balances, you pay everything off at the end of the month, and you’re even taking advantage of rewards programs to earn yourself some significant airline miles, or cash back bonuses. All told, you’re living proof that credit cards don’t necessarily need to be used strictly as a life raft, or as a ticket to the poor house.

But the banks have become privy to your wise credit card strategies, and are countering with some fancy footwork of their own.

Case in point, CitiBank — part of the CitiGroup Inc. empire — was caught last year using illegal practices to manipulate credit card customers, which cost them a hefty $700 million in fines from the U.S. Consumer Financial Protection Bureau. On top of that, Citi is on the hook for civil penalties totaling $35 million to be paid to both the CFPB and the Office of the Comptroller of the Currency.

The fines are the result of illegal credit card practices, related to add-on products and services that the CFPB says “harmed” consumers. “Roughly 7 million consumer accounts were affected by Citibank’s deceptive marketing, billing, and administration of debt protection and credit monitoring add-on products,” the CFPB said in a statement. “A Citibank subsidiary also deceptively charged expedited payment fees to nearly 1.8 million consumer accounts during collection calls.”

Basically, Citi was caught doing a number of things that many consumers likely didn’t even notice unless they were looking for them. For example, the bank was found to be charging consumers for products they didn’t want or receive, and also adding fees on to bills for services like credit monitoring and debt protection.

The CFPB has been on somewhat of a crusade against this kind of behavior over the past several years, though the agency itself was only set up in 2010 under the Dodd-Frank Act. But banks still aren’t learning from their mistakes.

“We continue to uncover illegal credit card add-on practices that are costing unknowing consumers millions of dollars,” said CFPB Director Richard Cordray, in a press release. “In our four years, this is the tenth action we’ve taken against companies in this space for deceiving consumers. We will remain on the lookout for similar conduct and will address it as we find it.”

For most Americans, this type of behavior is hardly surprising. And the hard fact of it all is that we really can’t expect financial institutions like Citi — or any other corporate power, for that matter — to change their behavior when they have little or no incentive to do so. We’ve written before about how the fines and punishments handed down by regulators are little more than proverbial slaps on the wrist — because banks end up profiting immensely from their malfeasance, even after fines and punishments are paid.

Hell, some banks like HSBC have straight-up promised regulators that they will continue to break the law, if it means that they will keep profiting from it. To expand on that, Reuters reports that the $700 million fine levied against CitiGroup, in this case, totals up to only about 1% of the company’s revenues for 2015.

It’s simply a cost of doing business.

Frustrating as it all is, the key here is to take into account that banks and credit card companies are more than willing to engage in fraudulent activity to keep raking in the revenues. That said, it’s up to you to be as vigilant as possible when poring over your finances.

What CitiBank was doing was adding products and services, and even bogus fees, to consumer’s monthly bills. By looking over your monthly statements, and knowing exactly how much you owe and should be paying, most people should be able to catch on to any corporate shenanigans fairly quickly, and make a call to either the bank or authorities if anything seems amiss.

Also, be extremely wary of deceptive marketing practices. There’s always something buried in the fine print or offers that seem, frankly, too good to be true. They probably are. That’s how you end up with payday loans charging between 391-521% interest, on average.

The recent CitiBank news just reaffirms that even though banks are issuing credit, and act as if they have the consumer’s best interests in mind, they’re in it for themselves. And aren’t above breaking the law, and your trust, to pad revenues.

Follow Sam on Twitter @SliceOfGinger

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