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Citi to Refund $330M to Credit Card Customers It Overcharged
- mabbo 9y ago> it caught the error in a routine internal review mandated under federal law Ladies and gentlemen, this is what regulations are all about. If not for a federal law forcing Citi to audit for this sort of thing they would either never have caught that they stole hundreds of millions of dollars, or more likely just never have reported it to anyone. The next time some politician tells you regulations are always bad, only lead to more expenses for customers, remember this.
- electrograv 9y agoHow about we say: Some regulations are good, some are bad. This seems like a really good one :)
- TAForObvReasons 9y agoEvery regulation was enacted with specific circumstances in mind. If you think a particular regulation is bad, try to look into the history and see why it was relevant in the first place.
- conanbatt 9y agoSo has every enacted crime.
- drefanzor 9y agoAre you a lobbyist? You realize regulations are created all the time because a company pushed for it to benefit the most, right? Some are good. Some are bad. Like everything in this world.
- dexterdog 9y agoBeing enacted doesn't mean it was ever relevant.
- cryptonector 9y agoWhat?! Don't you just blindly trust bureaucrats and politicians?! Say it ain't so dexterdog! More seriously, there are loads of bad regulations that were never good to begin with. Of course there would be. Motivations vary from do-gooding to incompetence to corruption, and if you believe this is impossible then I've got a bridge to sell you. And there are loads of bad regulations that are bad just because they are no longer necessary or relevant. Of course there would be.
- MrLeap 9y agoSo many problems are caused by the paradox of the human predator. Tools to protect against the human predator are always eventually used as a tool OF the human predator. Day 1: you create a regulation to stop some company from forcing employees to put their hands in a running wood chipper. Hurray, one predatory person has been stopped. Day 2: A predator by hook and crook lobbies for a regulation to give them a competitive advantage. Day 50: We've got 50 sincerely conceived regulations and 50 predatory regulations. Regulatory work has accelerated as the state has gotten better at it. Quite a few of the sincerely created regulations are meant to mitigate problems caused by the predatory ones! A call is sounded for deregulation. Day 51: 35 regulations are thrown out based on lobbyist pressure and "grass root" campaigns. Day 52: A company sends out a memo: "Due to the extra maintenance costs of hard stopping our wood chipper, we ask you now always leave it running. If it stalls on something the policy remains unchanged otherwise: pull it out." It's an eternal arms race and I think the predators win almost always. We can't recognize or disarm them as faster than they can use our own methods and tools against us. As far as I can tell, oppose consolidation of power and work to never surrender leverage over yourself.
- cryptonector 9y agoYou continue to assume that the regulators only ever write good regulations (good for the time when they produce them).
- yeukhon 9y agoI have to concur with parent in some circumstances. I was looking up what are some weird regulations. I didn't find much, perhaps I was not using the right terms. But this one strikes me: License to Close a Business [1]. When it comes to protecting consumers, for example, regulations are generally not bad. Some regulations have been removed because some people want "efficiency" - and again, we have to pick the circumstance. Too much regulations (getting permits from 10 different agencies is slow) can drive up the cost (more application fees, higher construction cost due to delay), but too little or too lax can do harm. We all face this at work as software engineers... [1]: https://wislawjournal.com/2010/11/03/regulations-show-courts-have-duty-to-protect-economic-liberty/ https://wislawjournal.com/2010/11/03/regulations-show-courts...
- runako 9y agoThat regulation sounded outlandish, so I read the article. The article is obviously anti-regulation, but even in context it's obvious that a) this is possible not a license to close a business but instead b) is quite possibly a regulation intended to prevent stores from having fake "GOING OUT OF BUSINESS" sales every couple of quarters, misleading consumers into making suboptimal decisions. Based solely on what's in the article, it wouldn't apply to businesses that don't carry inventory, notably services businesses.
- TAForObvReasons 9y agoClosest ordinance i could find from a cursory search: https://library.municode.com/wi/wauwatosa/codes/code_of_ordinances?nodeId=TIT6BULIRE_CH6.88CLTSA https://library.municode.com/wi/wauwatosa/codes/code_of_ordi... > Every person shall obtain a closing-out license before conducting a closing-out sale
- yeukhon 9y agoHere is the full text: http://city.milwaukee.gov/ImageLibrary/Groups/ccClerk/Ordinances/Volume-1/CH88.pdf http://city.milwaukee.gov/ImageLibrary/Groups/ccClerk/Ordina...
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- Alupis 9y ago> Every regulation was enacted with specific circumstances in mind. It's better said, that every regulation was enacted with good intentions... whether or not the result is good or bad is something entirely different.
- WillPostForFood 9y agoI'm the incumbent business in some area, I lobby for regulations that I can afford to pay, but makes it too expensive for potential competitors to get into the business. http://braidingfreedom.com/braiding-initiative/standing-up-for-natural-hair-braiders-right-to-earn-an-honest-living/ http://braidingfreedom.com/braiding-initiative/standing-up-f... https://en.wikipedia.org/wiki/Regulatory_capture https://en.wikipedia.org/wiki/Regulatory_capture
- Alupis 9y agoI doubt you vocalize your goal of driving competitors out of business when lobbying for some new regulation. You don't personally enact regulations... those who do are the ones with the good intentions. To them, the regulations seem sensible and net-good... no matter how misguided it might happen to be.
- criddell 9y agoI agree with you. I think it's also worth reviewing regulations periodically to see if they still make sense. For example, a few years ago when Uber moved into Sarasota, the taxi companies complained. The city did something remarkable - they eliminated the regulations that Uber wasn't complying with. AFAIK, there really haven't been any negative consequences.
- Scipio_Afri 9y agoYou mean other than the externalities of running the business that Uber places on its drivers through them being contractors, using their own cars (no benefits, drivers pay for wear & tear and gas).
- criddell 9y agoI don't believe the regulations that were repealed addressed any of that.
- vkou 9y ago> AFAIK, there really haven't been any negative consequences. None at all? Not a single one? Did Uber pinky swear this?
- threatofrain 9y agoI can also imagine that the same regulations enacted under a different administration, region, historical or technological context can have different consequences. It's natural to imagine that for such large systems, it's controlled by a little more than a few simple variable. But unfortunately, the levers and knobs that the population sees is something along the lines of low / high government and taxes.
- icantdrive55 9y agoI don't mind regulations. Actually, business just regulation. We have way too many municipal codes that just seem to harass the poor, and homeless. In California, there's only one place I know of that person could legally camp for free. It's located in Imperial County. It's just a small patch of desert land, that's ownder by a teachers union? Supposedly, they don't mind squatters. My point is when you have no back-up, and life becomes very grey; a cop shouldn't have so many municipal codes to throw at you. Hell, if Jesus Christ reappeared, he would probally be in some jail in a few weeks. Sleeping in a park. Fishing without a license. Donkey in city limits. Lady saw him naked whike baptizing someone in the creek--indecent exposure. Add on something lewd--because she was with her kids. Oh yea, that creek was a federally protected creek. Write up another citation. "Oh yea, let's 51-50 him. He claims to be the Son of God." I would like to tie fees/fines to income though. So many large companies, wealthy business owners, love regulations/requirements. It just prevents competition.
- JumpCrisscross 9y ago> The next time some politician tells you regulations are always bad I hear this line more, now, from people selling Bitcoin.
- DrScump 9y agoThe next time some politician tells you regulations are always bad Regulations published only after the Executive is a lame duck are usually bad, done only to reward some patron. Regulations timed to not start until after the Executive leaves office shouldn't be allowed in the first place.
- tdb7893 9y agoThe thing is that you can't just enact regulations that take place immediately. You can't just have the government stop doing its job because they are going to be leaving soon and if the next president wants to stop the regulations they can
- DrScump 9y agoyou can't just enact regulations that take place immediately For example, look at the huge volume of new regualtions that weren't even published until after the 2000 and 2016 elections (the final 8 weeks of 8-year terms). If you're waiting until the final 2% of your term to make new regulations that only affect your successor, those regs warrant a critical eye.
- conanbatt 9y agoWhat has been the cost of this regulation as a whole on the entire banking industry? Lets get that number and compare.
- deleted 9y ago[deleted]
- jhwang5 9y agowait, so suppose regulation costs financial firms too much, you'd rather have no recourse to getting reimbursed as an individual?
- jack_h 9y agoI'm guessing the argument is that if the cost that the customer bears for such regulated audits is greater than the refund they get from it then the customer actually lost money.
- chillwaves 9y agoThat sounds kind of like me complaining about the cost of my car insurance because for 10 years I didn't have any accidents. Seems difficult to know the benefit of such regulation without hindsight. Secondly, businesses face market pressures to provide low cost to customers (isn't that the whole argument for the free market?) therefore passing the cost to the customer should be weighed against other potential inefficiencies -- they might even have to take a smaller cut of profit! Funny how so many people can never justify the cost of doing business when it comes to protecting consumers.
- conanbatt 9y agoWhats your recourse to getting reimbursed for a regulation that is too expensive?
- toomuchtodo 9y agoSuperior to getting reimbursed when there is no regulation whatsoever. See: Equifax data breach costs shouldered by the American public who have no resource provided by regulation
- basementcat 9y agoThe other side might argue that the $330MM ultimately came from customers. If Citi didn't have to do such audits and no one complained, why should Citi be forced to "wealth re-distribute" these funds from one set of customers to another set?
- paulmd 9y agoAh yes, the well-known "if they don't notice you took it, it's not a crime" loophole. And no, the money wouldn't come from customers, why would it? Citi is a for-profit entity, this came out of their profits.
- basementcat 9y agoProfits come from customers.
- toss1 9y agoRight, yes, so it doesn't matter how much they steal from customers. Got it.
- egypturnash 9y agoPresumably a bunch of that money ultimately came from the very same customers who are receiving this payout. The fact that it’s called a “refund” might help tip the other side off on this.
- dsfyu404ed 9y ago>The next time some politician tells you regulations are always bad, only lead to more expenses for customers, remember this. The inverse opinion that regulation is always good is equally terrible.
- 111_1_111 9y ago> One regulation did some good, so all regulations must do net good. Hopefully I don't need to explain the flaw in this logic.
- Cw67NTN8F 9y agoI would've liked it more if the refund was accompanied by a fine of 3X the amount. Do they ever mistake to give people free money (at such scale?) I bet the stealing happens a lot more often.
- joncrane 9y agoBanks absolutely make mistakes in the favor of the client all the time. In general, banks want to get it right. If they want to make more money, they can always change the terms. Not saying that all banks are snow white lilies, but they generally want to have everything accurate to the rules. The way they win is by helping to write the rules.
- Cw67NTN8F 9y agoThe little town banks maybe. Frankly, the national one I think try to get away with as much as they can. And their bonus system is probably to blame: "by the time this is discovered, I'll be gone with my bonus."
- rainbowmverse 9y agoGood term for this: https://en.wikipedia.org/wiki/Wikipedia:Chesterton%27s_fence https://en.wikipedia.org/wiki/Wikipedia:Chesterton%27s_fence
- rubber_duck 9y agoI don't want to defend all regulation is evil strawman, and I don't know if this particular regulation is good or bad but your argument looks very weak. A proper value comparison would be 'cost of all audits caused by this regulation' vs 'benefits gained from mistakes found by it'. You also need to assess risk reduction, what kind of risks it protects from and set a value on that. Then you could realistically say if it's net positive or not. And when something is mandatory across industry it's easy to price in directly to consumers because nobody can compete on it, so this likely doesn't eat on a bottom line but increase price for consumers. Again not trying to argue that this or all regulation is bad, just that your evaluation of what's working seems deeply flawed.
- mrgordon 9y agoHonestly if Citi stole $1000 from me but now everyone has to pay $0.01 towards an audit so everyone can get their stolen money back, it’s worth it. They stole the money and they should pay it back with interest. I don’t care if it’s expensive for them because they didn’t build in basic mathematical safeguards when their business is literally charging interest on numbers. I’m not sure where this idea comes from that companies pass all costs on to customers. Citi does have profitable quarters and unprofitable quarters. If they have to take a $350 million charge off for overcharging people, then they will have a less profitable quarter and their shareholders will have to deal with it. If they try to jack prices way up to cover for it, then many people will just switch to Chase or Amex since they have better deals anyway. It’s like saying we shouldn’t charge Volkswagen for the emissions scandal because our cars will get too expensive. In reality, VWs will stay at basically the same price. If they got more expensive right after they got caught cheating everyone, then they simply won’t sell.
- selectodude 9y agoI just bought a Volkswagen, not only are they not more expensive, they’re substantially cheaper than they were a few years ago.
- adjkant 9y ago> A proper value comparison would be 'cost of all audits caused by this regulation' vs 'benefits gained from mistakes found by it' I don't think accurately captures it and is certainly not fair to the customers. The cost is not from the same source. Let's say audit cost per year is $100, and savings per year is $100: If they choose to forgo auditing: Citi: $200 Customers: -$100 If they do auditing: Citi: -$100 Customers: $100 It's apples and oranges. Regulation is about the customer and societal protections, not the protection of the company's profits. If a regulation is sound in terms of need but too expensive for a business, we shouldn't do away with the regulation altogether. As with your post, this isn't defending all regulations or that specific parent argument, just pointing out that the cost on the company being regulated versus money saved is not a valid metric for deciding if a regulation is needed. The regulation accounts for many more intangibles such as fair customer protections, and again, is not aimed at the value of the regulation for the company being regulated, though a regulation that causes a needed private business to be unprofitable is likely not sound.
- snambi 9y agoI always suspected their credit card bills. It was very confusing and very hard to verify. May be they did it intentionally? who knows?
- donarb 9y agoI suppose one good thing in this is that Citi caught this error on its own and not as a result of a class action suit. So customers will receive the full value of their overpayment, rather than a puny voucher dictated by a court where a large chunk goes to the lawyers bringing suit.
- bgirard 9y agoSo say that a customer was overcharged $100 in interest in Jan 2017 and they carried a balance all year. By Dec 2017 they carried an extra $100 on their credit card balance needlessly so they paid >$20 in additional interest (APR 20%) due to this overcharge. The article only mentions returning the original amount AFAIK so it looks like Citi might still be profiting from this error.
- nivla 9y agoI find it interesting how this show up the day after I had to call the customer service to clarify an interest fee on my account that din't make sense. So here is what happened, I got hit with a $12.xx monthly interest on a $2000ish purchase which I made less than 30 days ago and hasn't shown up on my previous statement. For clarification, my current APR on the card is 5.99%. It took me two reps and two accounts managers to learn how these things are calculated: 1) Interests are daily compounded. 2) Interests are not calculated on actual balance but on the average daily balance. 3) If you don't pay your statement balance in full by the end of the month, you lose your grace period for future purchases and interest would start accruing as soon as the transactions goes through. To reset this it would require you to make two full statement payments in a row. 4) If you purchase something and return it and the return takes a few days to process, you would still pay interest on for those days. The rep and the first account manager that spoke to weirdly dint have the basic understanding of interest rates. She argued that the $12 interest was on the $2000 for 4 days at the rate of 5.99%. Funny enough, she still din't find anything odd when I pointed out that it would mean, by the end of the year, I would pay $1095 ie. > 50% of the principal in interest! Anyways the second rep was knowledgeable enough to explain it.
- jjeaff 9y agoIs this for a US based credits card? I have never heard of needing pay off for two full months. Or for the average daily balance used in calculation and I'm pretty sure neither is the case for any of my cards. But I will need to check.
- san_dimitri 9y agoservers right. well said mabbo >The next time some politician tells you regulations are always bad, only lead to more expenses for customers, remember this.
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