How I fought Citibank and won

I got my first credit card when I turned 18 and it happened to be with Citibank. A few months ago, I notice the following offers on the backs of my Citibank credit card bills. I got the offer multiple times, but the July offer (far left below) is the only one I actually accepted. As far as I can tell, the offers are identical except for the expiration date.

As you can see, each of the offers lists out the following criteria:

1. Open a regular checking -- notice "regular" is not capitalized -- by the specified date

2. Deposit at least $1,000 into said account

3. Do one of the following: (a) set up a direct deposit, (b) pay at least 2 bills online per month for 3 months, or (c) do at least 5 qualifying non-PIN debit transactions per month for 3 months.

I open my account in mid-June, deposit $1,100 into it, and did the "pay 2 bills online per month" option. June and July pass with no problems. I pay 2 more bills in August without problems, but also discover that Citibank is charging me a monthly fee of $11.50. When I ask why, they say it's because my balance (~$1,000) was below the $6,000 minimum balance required to waive the fee. Like most people, bank fees *REALLY* piss me off because (a) I see no reason for them -- it is, after all, my money to which I give banks the privilege of holding, and (b) fees are just a pure revenue stream. When it comes to Citibank, though, bank fees doubly piss me off because Citibank took federal bailout money after their "give mortgages to every imbecile with a pulse" plan didn't pan out. Result? I and every other US taxpayer are part owners in Citibank. We deserve to be treated better. 

Anyway, take a moment and reread the offers I posted above. If you do, you'll see two things. First, "$6,000" is not actually mentioned at all anywhere in the offer. Instead $1,000 is mentioned, although it's as "deposit a minimum of $1,000" and not an explicit "the minimum balance required to avoid the $11.50 monthly service fee is $1,000". But here's the thing: Citibank also happens to offer a checking account -- the "EZ Checking" account -- where the minimum balance is coincidentally $1,000. To this day, I don't see why Citibank could not have put "deposit a minimum of $6,000" in their original offer -- I mean, honestly, just type a "6" instead of a "1" -- but I suppose the acceptance rate for the above offers would have been a lot lower.

When I complain that the $6,000 balance requirement was not disclosed when I opened the account, Citibank responds that the offer I accepted did say that the account was subject to "applicable terms and fees" and that the $6,000 balance requirement was such a term. My gut response was two-fold:

• First, assuming the $6,000 was in one of the applicable terms, that term was presented after I accepted the offer by opening the account. One of the rules about contract law is that an offer to contract cannot be modified after it has been accepted.

• Second, I reach back into my Contracts class in law school and pull out this rule: some terms to a contract can be presented after acceptance because it is logistically impossible to present *EVERY* term before acceptance, but any such terms presented post-acceptance cannot materially change the offer accepted. (For those of you interested, the case involved a guy who bought a computer from Gateway only to discover that some additional warranty-related terms came in the box when the computer arrived. He sued arguing the terms were not applicable to him, but he lost because the warranty terms were not material to the offer to buy).

That second thought is a mouthful, so let me illustrate with an example. Let's say that you sign a contract to buy a car in the process of which you agree to make monthly payments of a given amount for a specified number of months at a given interest rate. After you agree to those terms, your lender can't then single-handedly change its mind and, for example, double the monthly payment, triple the interest rate, and halve the number of months. I explain this to Citibank, but not surprisingly, their customer service people have no concept of offer, acceptance, or contract modification.

However, my bringing these points up did do 2 things: Citibank refunded me the $11.50 they charged me for August, and Citibank also said that I agreed to the $6,000 balance requirement when I opened the account. $6,000 is a big amount of money -- especially in this economy -- so I highly doubted I would have agreed to such a term.

A Mountain of Paper Arrives

At this point, I've been arguing for about 6 weeks or so via email with Citibank. Somehow, Citibank decided that it would be a good idea for me to receive a paper copy of all of the legal documents, terms, and other conditions that govern my account, perhaps thinking that I would come to my senses and agree with them if I could just see everything in paper form. Well, did paper ever arrive. There was so much of it and so much of it was completely irrelevant to my minimum balance disclosure inquiry that I decided to shoot the below video. I may be wrong, but my recollection was Citibank sent me:

• 2 useless APY tables, one of which is for Nevada, a state I don't live in.

• About 10 pages (front and back) of addendums, amendments, and amendments to addendums in English and Spanish, which were all useless in answering my question.

• One 100 page booklet (half in English and half in Spanish) that went over really basic stuff about Citibank accounts, like how to contact customer service, how to use an ATM, how to use a debit card, what to do if you lose your debit card, etc.

• One 60 page booklet (again, half in English and half in Spanish) that went over all of the different types of accounts Citibank offered.

I also don't speak or read Spanish, despite my living in California.

Of all of these, the last one seemed the most relevant so I spend some time perusing it. Unfortunately, Citibank doesn't break out "regular checking" as a heading so I have to spend about 2 hours reading the thing from front to back. On my second pass through, I discover something curious: "regular checking" is listed in 2 places, each with different terms. One says a minimum balance of $100,000 (under the heading "Citigold Accounts") and another says a minimum balance of $6,000 (under the heading "Citibank Accounts")

Enter Section 5 of the Federal Trade Commission Act

Because I am "very awesome" -- or more likely because I read the Wall Street Journal -- I know that banks often get sued/sanctioned/investigated for committing "unfair or deceptive acts or practices in or affecting commerce" in violation of Section 5 of the Federal Trade Commission Act (15 USC 45a). I would imagine that in the current economic climate a lot of banks, lenders, and other mortgage originators are dealing with UDAP investigations. While it doesn't say so explicitly, I assume Section 5 applies only to practices that affect interstate commerce. Happily, I live in California and Citibank's customer service people are in San Antonio, Texas, so it's not an issue.

Searching For Case Law: Because No One Cares What You Think

Banks -- especially multi-state banks like Citibank -- are regulated by many sources, including federal statute, state statute possible, and rules and regulations put forth by many agencies such as the Federal Reserve, Federal Trade Commission, FDIC, and Office of the Comptroller of Currency. Since I knew about Section 5 of the Federal Trade Commission Act anyway, I decided to keep things simple and research how Section 5 is applied in federal courts in the 9th Circuit (which includes California).

Happily (again), what "unfair or deceptive acts or practices in or affecting commerce" is often litigated and 2 9th Circuit Court of Appeals cases popped out at me: FTC v. Cyberspace.com and FTC v. Brown and Williamson Tobacco. You can go find the precise cases yourself (I don't have the cites, sorry), but the holding and approximate facts are: (NOTE: the meaning of a lot of legal cases hinge on specific facts -- I do not guarantee that I've summarized the facts with 100% accuracy).

• In Cyberspace.com, the defendant company sent a check to a bunch of small businesses that was made to resemble a refund check that would come from a vendor the small business dealt with. The end result was that the recipient small business would look at the check and just cash it, thinking it was a simple refund from a vendor. Unfortunately, by so cashing, the small business was agreeing to buy Internet service from the defendant for a monthly fee and (possibly) for a lengthy term. Was this Internet service sale disclosed? Yes, but it was on the back of the check in very small print. The 9th Circuit said that violated Section 5.

• In Brown and Williamson Tobacco, Brown and Williamson sold cigarettes in packages that indicated the cigarettes' nicotine content. Unfortunately, the method Brown and Williamson used was different from the methods other cigarette manufacturers used to compute their nicotine contents. As a result, a consumer could not compare Brown and Williamson's figures to those from other manufacturers. Did Brown and Williamson disclose this? Yes, but it was in small print on the cigarette package itself. The 9th Circuit found that violated Section 5 as well.

A Realization Hits Me

A few more weeks pass (now ~10 weeks of arguing) and I've paid the required 2 bills per month for 3 months to receive my $100. Unfortunately, Citibank still hasn't budged on the $1,000 vs. $6,000 minimum balance requirement so I've pretty much resigned myself to having to take Citibank to binding arbitration. Unfortunately (again), I also read the Consumerist.com website and the general sentiment from their stories on arbitration is that it's a kangaroo court in which the rule of law is followed by pure accident. Is the arbitrator supposed to follow the applicable precedential law? Yes, but I'd have a hell of a time proving the arbitrator didn't. And that doesn't even consider the financial risks involved: if I win, Citibank pays my arbitration costs (which are minimal since I'd have no lawyer), but if I lose, Citibank has the right to go after me for costs (which are likely to be significant since Citibank will definitely bring lawyers to bear). On top of that, I have the problem of never having done or seen an arbitration.

Bottom line: even after finishing law school, a legal route isn't the one that's likely to lead to victory. Fortunately (for once), I do have a path to victory: economics. People act in ways that financially benefit them and they (theoretically) stop acting in ways that don't.

A Proposal

Citibank and I both agreed that I had already fulfilled my requirements (namely, pay 2 bills online per month for 3 consecutive months) which meant that I was entitled to my $100 regardless. The only remaining issue was when I would get that $100. The original offer said it would be credited within 120 days, so I made Citibank the following offer: I'm due the $100 regardless. The cost of dealing with my continued complaints is most likely more than the $11.50 monthly fee you charge. If you credit me the $100 now, I'll close the account and take my business elsewhere.

I'd been dealing quite a while with a snooty Citibank VP in San Antonio for the past 2 weeks and I could sense that it was getting somewhat personal for her -- in other words, she wanted to win for herself and not just for Citibank.

It appears that I was wrong. She agreed. I got the $100 the next day.

Closing thoughts

The above is what worked for me in this particular and limited circumstance. I cannot and do not guarantee that it will in any way work for you in your case. Disputes like this are academically interesting, but almost certainly money-losers if you consider the time involved. On the upside, though, money does work in your favor since you're much less likely to be worried about costs than the business/organization you're complaining to.

UPDATE: 10/2/09

Oooo! It appears I touched a nerve with some poor bastard out there.

  Tuesday, December 22, 2009 08:02:15 PM