Citizens Bank returning $14M to customers, fined $20.5M, in deal with US on shorted deposits

 

WASHINGTON – Citizens Bank is returning $14 million to individual and business customers in an agreement with federal regulators for failing to credit customers the full amounts of their deposits.

The bank also was fined a total of $20.5 million by three federal agencies. Altogether, customers with hundreds of thousands of checking and savings accounts were shorted millions of dollars over six years starting in 2008, the regulators said Wednesday. The action, the first of its kind, was brought by the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corp. and the Treasury Department’s Office of the Comptroller of the Currency.

Citizens Bank pocketed the difference in cases where the totals marked on deposit slips didn’t match the actual money deposited, or when the bank’s scanners misread deposit slips or checks, the regulators said.

Citizens Financial Group Inc., among the 20 largest U.S. banks with about $137 billion in assets and $100 billion in deposits, is based in Providence, Rhode Island. Britain’s Royal Bank of Scotland currently owns around 20 per cent of Citizens and plans to have completely divested it by the end of next year.

The agencies said Citizens violated the prohibition against unfair and deceptive practices in the 2010 law that overhauled regulation of banks and Wall Street following the financial crisis. They said the bank failed to act to correct the deposit discrepancies if they fell below a certain amount ($50 from January 2008 to September 2012 and $25 from September 2012 to November 2013). While some customers benefited from errors in their favour, that doesn’t change the significance of the violations, the regulators said.

CFPB Director Richard Cordray called the bank’s conduct “shoddy practices that deprived consumers of money that was rightfully theirs when they made deposits.”

When a bank “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,” Cordray told reporters in a conference call.

Citizens said in a statement that deposits credited to customers who benefited from the errors were roughly equal to shorted deposits during the six-year period. Customers who were over-credited will keep the excess funds applied to their accounts, the bank said.

Citizens also said it put in a new teller system in the fourth quarter of 2013 to automate the process of checking for deposit errors, so numbers can be checked in real time as the customer is still with the teller.

“We are pleased to have resolved this matter from an earlier era,” the statement said. “We strive to do our best for our customers every day and to do right by customers when issues like this come to light.”

Under terms of the agreement, Citizens also will review its management procedures to prevent further violations in processing deposits.

Of the $14 million in refunds, $11 million will go to individual customers and $3 million to business customers.

Citizens has branches in 11 states: Pennsylvania, Delaware, Massachusetts, Rhode Island, Connecticut, New York, New Hampshire, Vermont, Ohio, Michigan and New Jersey.

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