Citibank Inc. will pay refunds and damages totaling $18 million to settle charges that the financial services company emptied the dormant accounts of credit card customers. A three-year investigation concluded that Citibank used an “account sweeping” program between 1992 and 2003 that quietly shifted accrued money in the accounts of 53,000 cardholders to a company-controlled fund. Citibank’s customers, who may have run a positive balance by returning a purchase for credit or accidentally making two payments, weren’t told about the sweeps.

Under terms of the settlement, Citibank agreed to return $14 million to customers, who will receive a combined $1.6 million plus 10% interest. Citibank will also pay the State of California $3.5 million in damages and civil penalties. Attorney General Jerry Brown, in a prepared statement, observed: “The company knowingly stole from its customers, mostly poor people and the recently deceased.“

A Citibank employee, Albert Mellon, discovered the account sweeps in 2001 and, after questioning the practice with his superiors and company auditors, was later fired, according to the Attorney General’s office. In 2005, Mr. Mellon brought a whistleblower complaint against New York City-based Citibank to the state Department of Justice. The settlement requires Citibank to pay Mellon $300,000. Dana Simas, a spokeswoman for the Attorney General stated: “Citibank had pretty much blackballed [Mellon] from the industry. When he came to our office, he was waiting tables.”

In documents filed with the Sacramento County Superior Court in 2006, another Citibank employee — which a judge deemed credible — said in a declaration that a department head ordered him not to tell company lawyers about the account sweeps because, “Stealing from our customers is a business decision, not a legal decision.” (Emphasis added.) The Attorney General’s office pursued Citibank for violations under the California False Claims Act for three years. As you may already know, California has a very strong law that deals with this sort of fraud and it’s very much consumer friendly. Alabama legislators should take a look at this law.

Source: The Recorder

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