International Law

Citi Bank Admits to Stealing from Customers

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Sometimes when you are wondering about economic view of the world, which leaves out fraud, then think about this story, from the AG in California about fraud.

Citibank after a three-year investigation into the company's use of an illegal "account sweeping" program.

Nationally, the company took more than $14 million from its customers, including $1.6 million from California residents, through the use of a computer program that wrongfully swept positive account balances from credit-card customer accounts into Citibank's general fund.

"The company knowingly stole from its customers, mostly poor people and the recently deceased, when it designed and implemented the sweeps," Attorney General Brown said.

"When a whistleblower uncovered the scam and brought it to his superiors, they buried the information and continued the illegal practice."

Between 1992 and 2003, Citibank employed a computerized "credit sweep" process to automatically remove positive or credit balances from credit-card customer accounts.

An account could show a credit balance if a customer double-paid a bill or returned a purchase for credit.

The credit sweeps were done without notifying the customer and without regard for whether the customer had any unpaid balances or other charges owed to Citibank.

The credit sweeps targeted more than 53,000 customers nationwide.

All of the affected accounts were in a recovery status, which includes accounts of customers who have died, sought bankruptcy protection, or been the target of litigation or other collection efforts by Citibank.

In July of 2001, a Citibank employee uncovered the practice and brought it to the attention of his superiors. The employee was later fired for discussing the credit sweeps with an internal audit team.

In the words of a Citibank executive, "Stealing from our customers is a business decision, not a legal decision."

The same executive later said that the sweep program could not be stopped because it would reduce the executive bonus pool."

Very nice.  Gotta maintain those executive bonuses, eh. 

Full post as published by Misleading Advertising Law on August 26, 2008 (boomark / email).