Citigroup Inc. (C) is making amends for overcharging advisory fees on certain investment accounts. The banking giant will pay $16 million to the customers in compensation for overcharging them. A formal agreement regarding this matter will be reached next week with the state of New York.
According to the New York Attorney General’s Office, this overcharging issue has its roots in a 2012 complaint lodged by a resident of Westchester Country. She complained against the bank for charging 0.3% more than the negotiated rate of 1.2%, which cost her $3,000 extra over three years.
After the subsequent investigation, the Attorney General’s Office found that many other customers were also being overcharged even after negotiating lower fees. In fact, according to the pact with the state of New York, over 31,000 customers of this New York-based bank are eligible for a refund.
Notably, the accounts under probe are known as TRAK accounts. These are maintained by customers while availing low-risk investment products, mainly mutual funds. Usually, the charges for obtaining advisory services range from 1% to 1.5%. Charging more than the decided rate has landed Citigroup in this legal trouble.
However, Citigroup has been cooperative during the investigation and has not made any qualms on agreeing to recompense the affected customers.
At present, Citigroup has a Zacks Rank #3 (Hold). Some better-ranked bank stocks include JPMorgan Chase & Co. (JPM), Associated Banc-Corp (ASBC) and Banc of California, Inc. (BANC). All these stocks hold a Zacks Rank #2 (Buy).