NOTICE: This is an archived press release. Information contained on this page may be outdated. Please refer to our latest press releases for up-to-date information.

Post date: February 27 2002

Agreement Curbs Telemarketing Appeals To Bank Customers

Attorney General Spitzer today announced an agreement with the nation's largest credit card issuer to reform the way products are marketed to its customers by telemarketing firms.

The 27-state settlement with Citibank follows a two-year investigation led by the attorneys general of New York, California, Illinois and Vermont.

"Citibank has an obligation to ensure that telemarketers do not engage in misleading practices using its customer lists," Spitzer said. "This agreement will end deceptive practices and provide a model of reform for both banks and telemarketers."

For years, Citibank has contracted with telemarketing firms to sell a variety of products and services to bank customers. In exchange for providing its customer lists, Citibank received a percentage of the sales by these companies.

The states raised concerns that the marketing practices of Citibank's business partners were deceptive and often resulted in consumers being charged for products and services - such as discount buying clubs, roadside assistance, credit card loss protection and dental plans - that they had no idea they agreed to purchase.

For example, many solicitations relied on free trial offers that failed to adequately disclose that it was the responsibility of the consumer to cancel during a trial period. Making matters worse, because individuals were not asked to provide their credit card information directly to the vendor, many consumers did not understand they would be charged once the free trial period expired.

The settlement agreement requires Citibank to include sweeping new consumer protection policies in its contracts with telemarketing firms. These reforms will:

  • Prohibit deceptive solicitations;
  • Require the bank to review and approve all scripts and marketing materials;
  • Require telemarketing firms to comply with all applicable consumer protection laws;
  • Prohibit customer charges unless there is express authorization of the account holder; and
  • Require clear and conspicuous disclosure of the identity of the telemarketing company if the script makes reference to the bank.
Citibank has agreed to pay $1.6 million to the states to settle the case, including $170,000 to New York State to cover the cost of the investigation.

Spitzer commended Manhattan-based Citibank for recognizing the problems with its vendors and for working with the states on a settlement that will be a model for others in the industry.

Joining New York in today's announcement are Arizona, California, Colorado, Florida, Kansas, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Maryland, Michigan, Mississippi, Missouri, Montana, Nevada, New Mexico, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Vermont, Washington, Wisconsin. Puerto Rico also joined in the settlement.

This case was handled for the Attorney General by Assistant Attorneys General Stephen Mindell, Shirley Stark and Herbert Israel of the Consumer Frauds and Protection Bureau.

For Adobe PDF files you can download Adobe Reader from Adobe Systems.