Citibank Agrees to Marketing Reforms, Payment

Citibank yesterday agreed to pay $1.6 million and reform its marketing practices to settle with state attorneys general who were investigating consumer complaints that the company shared data with deceptive telemarketers.

A total of 27 states were involved in the settlement. The money paid by Citibank will be used to cover state investigative costs.

The states said that since the mid-1990s Citibank had partnered with telemarketers to offer its customers products and services, for which Citibank would receive a percentage of the sales. Some of these services included dental plans and credit card-loss protection programs.

Some of Citibank's partners marketed negative-option, free-trial offers, the investigation concluded. In these offers, consumers must cancel prior to the end of the free-trial period or else be billed.

Some Citibank customers who accepted the offers did not understand that they would be charged and later complained that they had been deceived, according to the investigation. They were unaware that the telemarketers would use credit card information acquired in advance from Citibank, a practice the Federal Trade Commission is seeking to end with its proposed revisions to the Telemarketing Sales Rule.

In addition to the payments, Citibank agreed to prohibit its partners from charging consumers without express authorization from customers, review all telemarketing scripts and marketing material used by its partners, and require its partners to clearly disclose their identities if they mention Citibank in their telemarketing script.

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