Citibank settles with states

Advertiser Staff and News Services

Citibank, the nation's largest credit-card issuer, has agreed to pay $1.6 million as part of a settlement with 27 states, including Hawai'i, over the way telemarketing firms sell products and services to customers.

The agreement announced yesterday settles a two-year investigation led by attorneys general in California, Illinois, New York and Vermont. The states were looking into customer complaints about marketing practices of telemarketing firms contracted by Citibank.

New York-based Citibank admitted no wrongdoing in the settlement, but agreed to pay $1.6 million to the states for investigative costs or consumer education programs.

Hawai'i's share is $40,000, which reflects relatively few consumer complaints here against Citibank-contracted telemarketers, according to state Consumer Protection chief Stephen Levins. He said the money would go toward consumer protection efforts.

For years Citibank has contracted with telemarketing firms that sell products and services to its customers. In exchange for customer lists, Citibank received a percentage of the firms' sales, the states said.

Levins added that there was some question about whether Citibank sufficiently advised customers it was giving customer lists to telemarketers. "There's a real concern about providing private information to third parties without giving an explicit disclosure to consumers that that's going to happen," he said.

Citibank customers had complained the telemarketing firms used deceptive sales pitches, which resulted in charges for products and services they did not knowingly agree to buy.

Among other things, the agreement requires Citibank to prohibit deceptive solicitations, and Citibank said it already had implemented many of the reforms.