Doctor of Credit has reported on a concerning development for many new Strata Elite cardholders: Citi is locking the accounts of many recent Strata Elite cardholders and is requiring cardholders to mail in a 4506-C, which is a request for Tax Transcript form.
Reports started spreading around reddit last week that some cardholders were logging in to a message that their accounts were locked for fraud concerns and to call Citi for more information. Initial speculation had been that this was only affecting those who used an online link to apply for the Strata Elite 100K offer rather than going through a banker (some links had surfaced via reddit and Doctor of Credit that bypassed the need to visit a bank branch or call a banker to apply; some people had worried that those links were the trigger causing a review). However, we have seen data points both from people who applied online and in-branch who have had their accounts locked with a request from Citi for more information.
Amex is another issuer that occasionally requests a form 4506-C to verify income when they do a Financial Review (which typically happens when Amex wants to see proof that your income matches what you stated on the application and that you are capable of paying your bills). However, while not unprecedented, Amex Financial Reviews are not incredibly common. I certainly can not think of a time when there has been such a seemingly broad spate of them at one time as what we are currently seeing from Citi with regard to new Strata Elite cardholders.
As far as the tax transcript is concerned, it is obviously a method for Citi to be able to verify your stated income in order to accurately gauge their risk. It is obviously a heavily flawed method in the sense that your income at the time covered in your most recent tax return might not match your income today, you may have access to funds that aren’t included in your income, etc. Some people find the invasion of privacy to be a step too far. On the flip side, I would expect that those whose annual income at the time of last tax filing matches their stated income would likely be able to get their accounts unlocked by providing the form (though this is early in the process, so we don’t yet have a fuller picture as to the resolution). If you do not provide the form, it seems likely that Citi will close your account.
One thing I don’t know is how the ability to redeem points will be affected if you choose not to provide the form. New York State residents have some legal protection regarding the redemption of rewards for 90 days after account closure, though I believe there is a provision in the law related to points that were fraudulently earned. I don’t know where an account closure for refusal to provide the tax transcript would fall.
Further exacerbating things is the fact that folks who had opened the card but had not yet completed the spend likely do not yet have the points. It sounds like Citi is mailing tax transcript request forms to those who call in, though I’ve seen some data points that you may be able to find and download the form within your secure message center if you’re able to log in to your account. Either way, with Citi’s requirement to complete this process via snail mail, there is the potential that the window in which to meet minimum spend requirements will be severely impacted for some folks.
Overall, this is frustrating and concerning for new cardholders. Hopefully, Citi can clean up this mess with minimal impact to those whose accounts are ultimately unfrozen. Unfortunately, those who do not provide the form are likely to burn a bridge with Citi, so you’ll want to consider your options carefully.
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I just got off the phone with a Citi rep. I called the 800-695-5171 reconsideration line and had my Citi Strata Elite application approved (just needed to verify myself via a phone call-back). I expressed my concern that people who got the Strata Elite card have reported having their Citi accounts locked. He said, paraphrased: “I’m aware of that. The situation has been resolved. Although, we may still be in the process of unlocking some of the accounts that were locked. I’m not able to give more details.” I pressed further, asking if there’s a chance I’ll be required to do tax return verification, he said: “No, that situation was resolved. It shouldn’t happen to you, unless something very weird comes up.”
This is a problem for a number of reasons. The first reason is it goes outside the norms of how credit card companies operate. It’s not routine. When people sign up they don’t expect this to be the case because this is for unsecured debt. It’s not a mortgage application which faces tougher underwriting scrutiny. Financial reviews and verification are usually in specific cases where someone’s history or risk profile throws up a red flag in the system. A good chunk of people would not sign up if they knew it was likely. There is no benefit to the consumer to provide verification so there is no incentive.
The second issue is expected income for the current year which goes on the app may differ from the prior year income on the tax return. The credit card applications allow household income or income from others if over 21 years of age. So a good chunk of income might not be on your tax return.
The biggest issue here is Citi made a mistake by supposedly approving fraudulent applications and now it is ensnaring a lot of good customers. It’s not just that this card will be closed in 30 days but all cards with Citi. There are people who travel so 30 days is a problem for some.
The fact they are also locking CitiGold/Private Clients says this is not an income verification problem, it is a compliance problem — somewhere along the process Citi failed to do KYC check, and funny they decided the only way to redo KYC is to demand 4506C.
I agree. In my case, I was logged into my account when applying (I am a Citi client of 25 years) and the data was pre-populated. I am still locked, yet how can there be a genuine KYC issue? It is very odd.
I agree it is odd, the KYC hypothesis can be refuted in multiple ways.
However, Citi knows this will piss off their customers yet still did it. What is worse than pissing off your customers? To piss off your regulators! As for how Citi managed to screw up KYC or other compliance step during a CC application on such a scale? The reason, if it is ever known, will probably come down to Citi being Citi…
You know, before I read this thread it had not occurred to me to try to identify some semi-logical reason that might halfway explain Citi’s actions.
The process is deeply flawed:
The process Citi has adopted fails in all the above case (and likely more): most likely, they blow up their well off customers with complex tax situations and who are internationally mobile: presumably those who might want their ‘premium travel card’ and AA cards.
When you talk to the call centre people about the above, they know their process makes no sense: they also accept it should have been done before approval.Their suggestion is to write to the Office of the President of CitiCards.
Yeah, the household income is definitely an issue, especially for households which do not file jointly. I had put my household income down, so if I had been hit with this, the 4506-C would only show half of what I put down. I guess I do not have to worry about it, though, since Citi gave me an immediate denial.
@Nick Reyes Can you approach Citi’s PR team for comment? The number of requests, and the irrationality, points to some undisclosed problem Citi has.
One of the affected cardholders here.
My income on my tax return is significantly lower than my current and reported income. I can back up what I reported using paystubs but not using last year’s tax return. Super nervous about a shutdown now.
Transferred all the points earned from the Citi Elite welcome bonus. I applied using the DoC link. I wanted to keep the points transferrable but not willing to risk it. Sitting on a heap of Choice points now so Japan or Scandinavia here I come!
Did you do the transfer before or after the account lock? I’m locked and trying to transfer, to no avail. After clicking the “transfer points” button, the app says, “Our system encountered an error.” Desktop site just redirects to my account home page. Phone rep said they can’t do anything with my TY points while my account is locked – but, they left a note for a manager to call me back in case they can override (still waiting for the call back).
No issues for me getting account locked. I just transferred the points proactively just in case. I wish you luck.
Positive news is that a significant AA devaluation became less likely.
Citi gonna Citi….
When Wells Fargo asked me for my tax return or my Bilt application I laughed and only gave them the w2. They approved me anyway. Silly banks.
I’ll send the 4506-C but only if they ask between Friday 6pm and Saturday 6am.
Eastern Time.
I used the link to get the 100k,I hit the bonus 2 week ago. my history with Citi 1 checking and Costco biz card spend 10k plus on it every month. Didn’t get any email from my DP.
If you’re carrying a credit card from any issuer, privacy of financial (and purchasing) information is no longer something to be concerned about.
I’m an affected cardholder. Trying to learn from the wise – do folks usually opt for Certified or Registered mail, or trust regular untracked mail for these types of things? I’m so used to doing everything digitally these days, which is so much more secure and efficient. Citi, as usual, needs to get with the times.
The main difference is that Registered Mail offers the highest level of security and insurance for high-value items, while Certified Mail provides proof of mailing and delivery for important documents but with standard security. Registered Mail has a very strict chain of custody, can be insured up to $25,000 or more, and has a slower delivery process due to its security measures. Certified Mail is suitable for important documents like legal papers or tax returns and can be sent internationally, with tracking and signature options available for proof of delivery.
Amex did that during 07-08, now they use alternatives, for people don’t want to provide 4506, they will have option to link their bank account and show balance for Amex to verify
Are new applications going through the same thing? Wondering if it’s even worth applying now. I would rather not have accounts frozen for who knows how long before snail mail verification arrives.
It’d be a minor miracle if Citi didn’t screw up something. It has terrible risk management and IT compared to its peers. Citi probably realized that many who signed up were trying to double dip in the first year on its poorly designed annual credits, by the way how quickly they redeem those credits. The reason Citi has always opted for calendar year credits, rather than membership year for each individual cardholder, is because its IT can’t handle the latter. It isn’t a problem before for the $100 hotel credit on a $500+ stay (exclusive of taxes) on Citi Premier, because the credit is rarely worthwhile, but the newer credits on the Elite card is a different game that Citi just doesn’t know how to play.
The Citi fraud prevention is especially bad.
I have exactly one bank that still asks for me to file a travel notification when I travel internationally.
I have exactly one bank that consistently declines my cards when I travel internationally (despite filing a travel notification).
I have exactly one bank that has such crappy fraud alerts that it can take 15-30 minutes for the verification message to arrive, long after I have paid with a different card and left the store.
Guess which bank…