Citibank settles with Nevada, others over telemarketing

Melissa Mccord

Thursday, Feb. 28, 2002 | 9:48 a.m.

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

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

New York-based Citibank admitted no wrongdoing in the settlement.

But under the terms of the settlement, Citibank said it will pay $1.6 million to the states for investigative costs or consumer education programs.

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

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, Wisconsin Attorney General James Doyle said.

In some cases, telemarketers promoted free trial offers of services or products, but customers did not understand they had to cancel the product or service during the trial period or the companies would charge them, the states allege.

The settlement agreement requires Citibank to prohibit deceptive solicitations and to approve all scripts and marketing materials. It also requires telemarketing firms to comply with consumer protection laws and to clearly disclose their identities if their scripts refer to the bank.

The settlement also prohibits customer charges without the card holder's express authorization.

Citibank said it already has implemented many of the reforms included in the agreement.

"We believe that this collective effort will enhance our communication with our cardholders to ensure that they have the necessary information to make informed decisions about their purchases," Citibank spokesman Mark Rodgers said.

The states involved in the settlement are Arizona, California, Colorado, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Maryland, Michigan, Mississippi, Missouri, Montana, Nevada, New Mexico, New York, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Vermont, Washington and Wisconsin.