The Consumer Financial Protection Bureau on Tuesday ordered Citibank to pay $700 million to its customers for deceptive add-ons to credit card contracts, charging that the bank deceptively charged cardholders.
The consumer agency and Office of the Comptroller of the Currency also each charged the bank with a $35 million penalty.
"We continue to uncover illegal credit card add-on practices that are costing unknowing consumers millions of dollars," bureau Director Richard Cordray said. "In our four years, this is the 10th 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."
The $700 million in penalties will be paid out to the 8.8 million customers affected by the illegal practices, the bureau said. Customers will not need to do anything to collect their payments.
Citibank tricked customers into buying debt-protection products when they signed up for credit cards, the consumer agency said, with deceptive marketing and misrepresentation of fees. Then it charged customers for benefits they didn't receive.
The illegal activity took place over 2003-2013, according to the bureau, at both Citibank and its subsidiaries Department Stores National Bank and Citicorp Credit Services. Citibank is the consumer arm of Citigroup.
Tuesday's announcement marked one of the largest consumer relief actions taken by the bureau, which was created by the 2010 Dodd-Frank financial reform law and opened in 2011.
The announcement came as Democrats celebrated the fifth anniversary of the law's passage. Republicans, on the other hand, have sought to overhaul the bureau, calling it unaccountable and overreaching and criticizing the law.