A subsidiary of Citigroup will be forced to reimburse about $16 million it overcharged customers as part of an agreement with the New York state attorney general”™s office.
Citigroup Global Markets Inc. overcharged more than 31,000 customers on advisory fees assessed to holders of so-called TRAK accounts, which require a minimum deposit that is invested in mutual funds. Customers with TRAK accounts pay a negotiable advisory fee to the bank, generally between 1 and 1.5 percent.
The settlement, announced at a press conference in Yonkers on Friday, was reached after Attorney General Eric Schneiderman”™s office launched an inquiry based on a 2012 complaint from a Westchester County resident who had been overcharged, seeking to determine whether other TRAK account holders were similarly affected.
According to the complaint, the customer had negotiated a 1.2 percent initial fee for her account but was charged the standard 1.5 percent over a period of three years, causing her to be overcharged by more than $3,000. Schneiderman”™s office then launched its inquiry, which determined many customers were being charged higher-than-negotiated rates and unaware they were paying more than they should.
“Often, it takes just one tip to uncover an error that affects tens of thousands of individuals,” Schneiderman said in a press release. “In this case, a bank customer complained to my office about her account. We investigated that complaint and found a widespread problem, one that cost bank customers, in New York and across the country, millions of dollars.”
Restitution of $15,969,824.47 will go to 31,324 current and former TRAK account holders, including 2,931 New York account holders who will receive a total of $1,305,197.08.
The attorney general”™s investigation is continuing. Citigroup Global Markets is conducting a wider review of other types of accounts to ensure that any account holders who have been overcharged will also be paid restitution, the attorney general’s office said. Schneiderman”™s office will oversee the review and remediation efforts.
