Citibank Settles Probe of Marketing

Citigroup Inc.’s Citibank, the nation’s largest credit card issuer, has agreed to pay $1.6 million as part of a settlement with 27 states over the way telemarketing firms sell products and services to the banking company’s customers.

The agreement announced Wednesday settles a two-year investigation led by attorneys general in California, Illinois, New York and Vermont. The states were looking into customer complaints about the marketing practices of telemarketing firms contracted by Citibank.

New York-based Citibank admitted no wrongdoing. Under the terms of the settlement, Citibank said it will pay $1.6 million to the states for investigative costs or consumer education programs.

Citibank has contracted with telemarketing firms for years that sell products and services to its customers. The states say Citibank received a percentage of the telemarketing firms’ sales in exchange for its customer lists.

Citibank customers had complained the telemarketing firms used deceptive sales pitches, which resulted in charges for products and services they did not knowingly agree to buy, Wisconsin Atty. Gen. James Doyle said.

The settlement agreement requires Citibank to prohibit deceptive solicitations and to approve all scripts and marketing materials. It requires telemarketing firms to comply with consumer protection laws and clearly disclose their identities if scripts refer to the bank.

The settlement also prohibits customer charges without the cardholder’s express authorization.

Citibank said it already has implemented many of the reforms included in the agreement.

“We believe that this collective effort will enhance our communication with our cardholders to ensure that they have the necessary information to make informed decisions about their purchases,” Citibank spokesman Mark Rodgers said.

Citigroup shares rose 44 cents to $44.24 on the New York Stock Exchange.