Citigroup, AG reach $16M settlement on fee overcharges

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.