Bank Error Not in Your Favor: Citi Overcharged Interest on 1.75 Million Credit Card Accounts
While TPG implores readers not to carry balances on their travel rewards credit cards — the interest charges surely negate any rewards you'll earn — the reality is that tens of millions of Americans carry a credit card balance. And if you've carried a balance on a Citi credit card, the bank might owe you a refund for overcharging the interest on your account.
Citi unveiled in a filing Friday that it discovered "methodological issues" in the calculation of interest on approximately 1.75 million of the bank's 150 million credit card accounts. Citi will be paying approximately $330 million in refunds from the error, meaning that the average refund amount is nearly $190 per affected account.
The issue specifically concerns cardholders that have missed two or more payments, which triggers a higher penalty interest. Once these cardholders have made payments on time for six straight months, they're legally eligible for an interest rate reduction. Half of the 1.75 million affected Citi accounts received no interest rate reduction. The other half received a partial reduction, but the interest rate wasn't lowered enough.
In a statement to the New York Times, a Citi spokesperson noted that the bank is "taking every action to provide refunds as quickly as possible." CNN Money reports that the $330 million in refunds includes interest on the overcharged amounts. However, it's unclear how the bank calculated the amount of interest to pay cardholders on the erroneously charged amounts.
The issue was caught by Citi during a routine internal review required by the Credit Card Accountability Responsibility and Disclosure Act (CARD Act). The customer-protection bill is estimated to have saved credit cardholders over $16 billion in fees during the period when it took effect in 2011 through the end of 2014.