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Updated on Tuesday, July 3, 2018
Last week, Citibank agreed to repay $335 million in fines to an estimated 1.75 million consumers, as a result of a settlement with the Consumer Financial Protection Bureau. The settlement found that Citibank failed to reassess and adjust APRs on 1.75 million credit card accounts over an eight-year period.
Under the Truth and Lending Act, creditors must reassess APRs at least once every six months and maintain proper documentation, providing written notice when APRs increase and why they rose.
While the act doesn’t require creditors to reduce consumers’ APRs, it does require them to take reasonable action to ensure they are charging consumers fair and reasonable rates. The CFPB found that Citibank was not abiding by these regulations, hence requiring the $335 million repayment to consumers.
While Citibank is required to repay consumers, they did not receive a fine from the CFPB since they, “self-identified and self-reported the violations to the Bureau, and self-initiated remediation to affected consumers.”
“Citi is pleased to have resolved the matter with the Bureau, and we reiterate our sincere apologies to our customers for not correcting these issues sooner,” Citibank said in a statement.
“Citi estimates that about 90 percent of the interest rate savings due to customers were delivered as required. Citi is currently issuing refunds for the remainder to 1.75 million credit card accounts. Refunds, which will average $190, will continue over several months and be largely completed by year-end.”
Consumers rights for getting APRs reevaluated
Per Chapter 3 of the Truth and Lending Act, consumers have several rights when it comes to APR increases and the subsequent revaluation required by creditors.
Here’s a breakdown of your rights:
- Generally, APRs can’t be increased within the first year of account opening. There are a few exceptions that must be disclosed to be in effect; they include an increase due to: the end of a promotional period, a variable APR change, the end of a temporary hardship agreement or a minimum payment not received within 60 days of the due date.
- Creditors must provide written notice if your APR is increased. This notice includes reasons why your APR increased.
- If your APR was increased, it should be reevaluated at least once every six months. During these reviews, your creditor should reassess the factors it initially considered when it increases your rate, to see if those factors have changed and whether your rate can now decrease.
Tips to save on credit card interest
Complete a balance transfer. If you are currently carrying a balance on a credit card with a high APR, completing a balance transfer can be a great way to save on interest charges and get out of debt. You can transfer your balance to a balance transfer credit card offering a low or 0% intro period, and benefit from intro periods as long as 21 months. During the intro period, you can take the needed time to pay back balances while avoiding high interest charges. Just beware balance transfers typically come with a 3% fee, but this is often outweighed by the amount you save in interest. However, there are intro $0 balance transfer fee cards available that can increase your savings.
Use a card with an intro 0% APR for new purchases. If you carry a balance month to month or plan on making purchases that you can’t pay for by your statement due date, a credit card with an intro 0% APR for new purchases can save you money. These cards won’t charge interest during the intro 0% APR period — which can be as long as 20 months. So any recurring expenses you have or new purchases you may make won’t rack up interest charges. Just remember to pay your balance in full before the intro period ends so your balance isn’t hit with the ongoing APR.
Negotiate with your bank. Some banks are willing to work with you if you are struggling to make payments or are incurring high interest charges. You can try speaking with a bank representative to see if they can work out an agreement where they lower your APR. Even if it’s just temporary, a lower APR for a short period of time is better than none at all. Try to pay each bill on time and in full so you don’t have to worry too much about your APR and avoid interest charges.