Citibank Accused of Tricking New Customers about “Free” Frequent Flyer Miles
Saturday, February 18, 2012
The same week Citibank settled one lawsuit alleging fraudulent business practices, the bank was hit with another civil case, this one involving the luring of consumers to open accounts through frequent flyer miles promises.
A federal class action against Citibank says it offered 40,000 frequent-flyer miles with American Airlines to anyone opening an account. Only the bank didn’t tell new customers that they had to report 2½ cents per mile as income to the Internal Revenue Service.
The lead plaintiffs, Bertram Hirsch and Igor Romanov, only discovered this fact when they received 1099 forms from Citibank for $1,000 of income. Applying an average combined federal and state tax rate of 35%, this means that opening a new account with Citibank actually cost Hirsch, Romanov and others $350.
“It is widely understood in the marketplace that airline miles are not reported to the IRS as being taxable for income tax purposes. Indeed, Citibank expressly informed plaintiff Hirsch that the American Airlines miles that he would receive for opening up Citibank checking and savings accounts were not taxable,” reads the lawsuit.
The mileage case comes just as a division of Citibank agreed to settle a whistleblower lawsuit that the federal government had joined. In that case, CitiMortgage agreed to pay $158.3 million for misleading the Federal Housing Administration about the insurability of thousands of risky home loans. As a result of CitiMortgage’s duping of the agency, the government lost nearly $200 million.
To Learn More:
New Customers Furious at Citibank Gimmick (by Julia Filip, Courthouse News Service)
Citibank Deems Frequent-Flier Miles Taxable, but Does the IRS? (by David Lazarus, Los Angeles Times)
Federal Government Settles Fraud Lawsuit Against Citimortgage, Inc. For Reckless Mortgage Lending Practices (U.S. Department of Housing and Urban Development)
- Top Stories
- Unusual News
- Where is the Money Going?
- U.S. and the World
- Appointments and Resignations
- Latest News
- Your Tax Dollars at Work…State Dept. Lobbies Abroad for Monsanto Biotech Seeds
- Director of the Federal Housing Finance Agency: Who Is Mel Watt?
- Pacific Islanders Ask U.S. Military to not Use Pagan Island for Target Practice
- Wrongful Death Lawsuit against Wells Fargo in Wrongful Foreclosure Case
- Ambassador from Chad: Who Is Maitine Djoumbe?