C Citigroup Inc

By AnnaMaria Andriotis 

Citigroup Inc., one of the largest U.S. credit-card issuers, said Friday that it failed to lower interest rates for some credit-card customers as required by federal law.

The bank said it plans to issue around $335 million in refunds to affected customers, or about $190 on average per affected account.

Citi said the issue stemmed from the bank increasing annual percentage rates on cards after customers missed payments as well as other reasons. Federal law, including a provision in the Credit Card Accountability Responsibility and Disclosure Act that was passed in 2009, requires card issuers that increase rates to review those accounts every six months.

Issuers are then supposed to reduce the rate if the reason for the increase is no longer a problem. That could include, for example, a cardholder establishing a pattern of again paying their bill on time.

Citi said the issue affected 1.75 million U.S. credit-card accounts over a period ranging from 2011 to 2017. Some of those accounts received smaller rate reductions than they should have, while others didn't receive any reduction, the bank said.

The bank currently has around 120 million U.S. credit-card accounts and had a total of about 250 million U.S. credit-card accounts during the period in which the problems occurred. Citi is the third-largest U.S. credit-card issuer by total volume and by outstanding balances, according to the Nilson Report.

The bank, which disclosed the issue in its annual securities filing made Friday, said a periodic internal review identified the flaws in its methodology. Citi reported the issue to its regulators, including the Consumer Financial Protection Bureau.

Citi hasn't yet identified all the consumers affected and said they include current and former cardholders.

--Christina Rexrode contributed to this article.

Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com

(END) Dow Jones Newswires

February 23, 2018 11:54 ET (16:54 GMT)

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