Citigroup agreed to refund 1.75 million customer accounts $335 million as part of a settlement reached with regulators on Friday.
The Consumer Financial Protection Bureau, which regulates financial companies to keep American consumers safe, said the settlement stemmed from Citi’s failure to properly evaluate and reduce the annual percentage rates, or APRs, on some users' credit cards.
Citi said a statement sent to CNBC Make It that while about 90 percent of its customers did receive a proper evaluation of their APRs, the company is currently issuing refunds to the roughly 1.75 million customer accounts that did not. The bank said the refunds will average about $190 and expects to have them completed by the end of the year. "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,” the company said.
Because Citi was proactive about identifying the problem and reporting it to the CFPB in 2017, the CFPB did not issue any additional fines on Friday.
Banks are required by law to review whether credit card customers are eligible for reduced rates based on factors such as credit risk and market conditions. These reviews must take place within six months after an interest rate increase.
The Federal Reserve just increased rates a quarter of a percent earlier this month. While that means the economy is doing well, that also means consumers should be carefully watching their credit card rates. Hiking up the rate by just a quarter of a percent will cost Americans who rely on plastic approximately $1.6 billion extra this year.
If you do carry a balance on your credit cards, make sure to pay it down as quickly as possible so you're not paying that extra interest for long. Alternatively, look around for a card that offers a zero-interest balance transfer to reduce your current interest and avoid the fallout from future rate hikes.
Keep in mind that interest rate hikes effect more than just your credit card. "That ripples out to every business, every consumer, every municipality, even other governments all over the world," Greg McBride, chief financial analyst at Bankrate.com, recently told CNBC Make It. For example, if you currently have an adjustable-rate mortgage, consider switching to a fixed-rate one, so you aren't as exposed if the Fed continues to increase rates.
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