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Citibank suddenly changed the way it charges interest on payments made with its credit cards through mobile payment apps like Venmo, PayPal and Cash App, in violation of the law, a new nationwide class action lawsuit says.
In a class action filed Friday in a California federal court, Plaintiff David Abel alleges Citibank broke federal and state laws by recategorizing the way it charges interest on credit card transactions made through payment apps in 2020, without telling customers.
Over the last few years, the popularity and use of payment apps have spiked, the class action says. Until last year, payments made with a Citibank credit card through the app were charged interest at the rate of a standard purchase transaction, with an interest-free grace period.
However, Abel says starting sometime in early 2020, without warning its customer, Citibank began to re-classify purchase transactions made through apps funded with Citibank consumer credit cards as cash advances.
“Unlike standard purchase transactions, cash advance transactions incur a fee on each such transaction, are subject to higher interest rates, and have interest calculated from the date of purchase without any grace period,” the class action claims.
Sometime in October, according to the claim, Abel looked at his Citi Simplicity MasterCard credit card account monthly statements online where, to his surprise, he saw his Venmo payments on July 8 had been slapped with Cash Advance fees of $10 per transaction by Citi. This happened on at least five occasions on five different days.
The payments were for a music service, not to withdraw cash from an ATM machine, conduct a wire transfer of money, purchase gaming chips, place a wager, or any of the examples of cash-like transactions listed by Citi in its Card Agreement, the class action says.
Abel says he called Citi to reverse the fees, but it would not.
“Citi’s undisclosed reclassification of [the transactions] from standard purchases to cash advances amounted to a significant material deviation from its application of its Card Agreement account terms,” the class action alleges.
It says the bank sowed confusion among its customers by not informing them of the changes.
“Despite the ubiquity of mobile electronic payments over the last several years, Citi’s decision to not disclose its re-classification of [mobile payment app] transactions as cash advances is a self-serving choice to derive fee and interest income at the expense of its credit card consumers who used their Citi consumer credit card to fund [mobile payment app] transactions.
“This sudden and unannounced change left Plaintiff and other Class members saddled with unexpected fees and increased interest charges without any warning that such a change in processing or coding of [mobile payment app] transactions was forthcoming by Citi,” the class action states.
Abel is seeking to represent anyone who used a mobile electronic payment app to make a payment with a credit card through Citi and was charged cash advance interest, plus a California subclass.
He is suing for breach of contract, violation of the federal Truth in Lending Act and California business laws. He is seeking certification of the class action, an injunction, restitution, costs and fees and a jury trial.
The class action lawsuit comes just months after Citibank agreed to refund an additional $4.2 million to credit card customers in five states following a larger 2018 settlement around fees.
As part of the 2018 settlement with the Consumer Financial Protection Bureau, Citi agreed to repay $335 million after it discovered it had improperly increased some customers’ interest rates, Bloomberg reported.
What do you think of Citi’s policy change in regards to mobile electronic payment apps? Let us know in the comments!
The plaintiffs are represented by Manfred P. Muecke of Manfred, APC, and Todd D. Carpenter and Scott G. Braden of Arlson Lynch LLP.
The CitiBank Mobile Payments Interest Class Action Lawsuit is David Abel et al., v. Citibank, Case No. 2:21-cv-03889, in the U.S. District Court Central District of California.
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7 thoughts onCitibank Ramps Up Interest Rates on Mobile App Payments, Class Action Claims
please add me.
Please add me Karen Lorentzson
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I always have paid my mobile service with my citibank credit card. Count me in and add me please.