Citizens Bank Fined for Failing to Credit Consumers for Full Deposits

The consent order from the CFPB requires the bank to provide approximately $11 million in refunds to consumers and pay a $7.5 million penalty for the violations.

Providence, R.I.-based Citizens kept the difference when the totals marked on deposit slips didn’t match the amount deposited or when the bank’s scanners misread deposit slips or checks, regulators said.

Citizens Financial Group Inc. has been ordered to pay at least $34.5 million for failing to credit to customers’ accounts the full amount of their deposits.

A bank insider turned whistleblower reported the bank’s illegal practices, which were investigated by the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency along with the Consumer Financial Protection Bureau. “Consumers deserve to have confidence that they can move their money around securely without exposing themselves to unwelcome risks, such as a bank resolving an error by keeping the difference for itself”.

“When a depository institution violates the basic tenet of what it means to offer a deposit account-that is, to receive and keep safe the customer’s funds-it imbues a deep sense of mistrust”, said CFPB Director Richard Cordray on Wednesday.

“But the bank’s practice was not to verify and correct deposit inaccuracies unless they were above the $25 or $50 threshold”, the CFPB said. From the bank’s point of view, one could argue that the practice “was a wash”, in that the errors did not directly profit the bank or harm its customers as a collective group, Cordray acknowledged.

The CFPB is taking this action in coordination with the FDIC and the OCC.

Citizens Bank, which operates in the Northeast and Midwest, said Wednesday that its practices for dealing with mathematical errors “could have been better”. The FDIC separately ordered the bank to pay restitution and a $3 million civil penalty.

No less than $11 million in refunds are on account of shoppers and $three million to enterprise clients, regulators stated. “However, these past practices and disclosures, principally prior to early 2011, could have been better”.

Citizens also said the bank is “working with our regulators to make appropriate redress as quickly as possible”. Citizens Bank said the reconciliation process was automated at the end of 2013 after the bank rolled out a new teller system.

Customers who were overcredited will keep the additional funds and those who were undercredited will be reimbursed, according to the bank statement. That’s why the government is slapping the company with civil sanctions and fines, said bank regulators who joined Cordray in announcing the resolution with the bank.