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A.G. Schneiderman Announces Return Of Additional $4.5 Million To 15,000 Citi Customers For Fee Overcharges

Schneiderman’s Investigation Will Return More Than $20.5 Million In Total Reimbursement To More Than 46,000 Overcharged Customers

Schneiderman: Discovery Of Additional Overcharges Reflects Citi’s Continued Effort To Identify And Fully Repay All Overcharged Customers

NEW YORKAttorney General Eric T. Schneiderman today announced that as a result of an interim agreement with Citigroup Global Markets, Inc. (CGMI), a subsidiary of Citigroup, more than 15,000 CGMI customers who were overcharged fees on their investment accounts will receive reimbursements totaling more than $4.5 million. Customers were overcharged when CGMI failed to rebate certain customers’ accounts after periods of inactivity when fees should not have been charged, but were. CGMI identified the overcharges as part of an internal review conducted in cooperation with the Attorney General’s investigation of CGMI fees. The investigation previously led to $16 million in principal and interest going back to 31,000 CGMI customers, and now thousands more customers are eligible to get money back.

“My office will work with any financial institution that identifies and wants to correct an error that harmed its customers. In this case, Citi’s cooperation with our investigation will result in $20.5 million being refunded to tens of thousands of Citi customers in New York and elsewhere,” Attorney General Schneiderman said. “I want to thank Citi for its continued cooperation with our investigation, which has ensured that Citi customers are getting back the money they deserve.”

For certain types of investment accounts, CGMI charges fees prospectively, for example, assessing fees at the beginning of a quarter for account management during the upcoming quarter. For a variety of reasons, a CGMI customer’s account may be ‘frozen’ during a particular period of inactivity. In some cases, customers should not be charged fees during that period. CGMI’s review revealed that if a customer requested a refund of prospectively paid fees that covered a period when the customer’s account was frozen, CGMI sometimes rebated the fees to the customer. However, CGMI’s review revealed that thousands of customers who were overcharged fees during frozen periods were not allocated rebates they should have received, either because they did not request a rebate, or because CGMI did not have policies and procedures in place to determine when rebates were appropriate. As a result, CGMI overcharged more than 15,000 accounts. CGMI will repay its customers for the overcharges, a total of more than $4.5 million in principal and interest. More than 2,700 New York customers are set to receive a total of approximately $657,000.

The Attorney General’s investigation of CGMI began in 2012 after a complaint from a Westchester resident led the Attorney General to investigate fee overcharge issues at CGMI. The investigation has proceeded with CGMI’s cooperation, and will result in the repayment of more than $20 million in principal and interest for fees CGMI overcharged its customers. Due to the Attorney General’s investigation, CGMI initially identified more than 31,000 customers who were charged higher advisory fees than they negotiated on so-called “TRAK” accounts. In an October 22, 2014 interim agreement between CGMI and the Attorney General, CGMI agreed to reimburse its customers for those overcharges. CGMI also agreed to continue to cooperate with the Attorney General’s investigation and conduct a wider review of other types of accounts to ensure that any account holders who were overcharged would also be paid restitution. Citi has continued to cooperate since the October 2014 agreement, and its wider review of customer accounts identified the additional 15,430 Citi customer accounts that were overcharged fees during frozen periods.

As a result of the Attorney General’s investigation and Citi’s cooperation, more than $20.5 million will be repaid to more than 46,000 customers, including approximately $2 million to more than 5,600 customers in New York. The Attorney General will continue to oversee CGMI’s review and remediation efforts.

The investigation into Citigroup Global Markets, Inc. is led by Katherine Milgram, Deputy Chief of the Investor Protection Bureau, and Assistant Attorney General Dhawal Sharma.  Gary Brown, Assistant Attorney General-in-Charge of the Westchester Regional Office, has also contributed to the investigation. Karla G. Sanchez is the Executive Deputy Attorney General for Economic Justice. The Westchester Office is part of the Division of Regional Affairs led by Executive Deputy Attorney General for Regional Affairs Marty Mack.