Citigroup Inc., one of the world's largest credit-card issuers,said it will refund $335 million to U.S. customers whose annualpercentage rate should have been lower.

The lender determined that a method it was using to calculateAPRs didn't properly reflect the full benefit customers should havereceived for good behavior, such as paying on time, the NewYork-based bank said Friday in a securities filing thatdisclosed the issue and the total cost. It's currently reviewingaccounts and plans to have refund checks in the mail by the secondhalf of the year.

The Credit Card Accountability Responsibility and Disclosure(CARD) Act of 2009 requires lenders to periodically review accountswhose APR had been raised to see if subsequent good behavior makesthem eligible for a rate reduction. From 2011 to 2017, the bankdelivered $3 billion in savings through such reviews. That wasabout 90% of what customers should have received.

“Citi has semi-annually reviewed U.S. credit-card accounts thatexperienced an interest-rate increase to identify those eligiblefor a rate reduction,” spokeswoman Liz Fogarty said in a statement.“A periodic internal review identified potential flaws in themethodology used to reevaluate interest rates on some credit-cardaccounts.” The issue is a setback for Chief Executive Officer MikeCorbat, who has tied some of bank's future growth to expanding its credit-card operation. In 2015,the bank was ordered to pay $700 million to customers and fined $70million over illegal practices related to its marketing of cardadd-on products.

In the latest case, Citigroup will issue refunds, or in someinstances reduce an account balance, for 1.75 million affectedaccounts, the bank said. That works out to an average of about $190an account, including interest owed. More than half of thoseaffected should have gotten bigger rate cuts, while the rest wereentitled to a reduction but didn't get one.

Citigroup managed a total of 250 million accounts across itsbranded and retail-partner cards during the period in question, andcurrently has about 120 million accounts. The company will findcustomers who no longer have an account with the bank and make surethey receive their refund.

The lender discovered the flaws on its own and self-reported itto regulators, according to the filing. It didn't find any evidenceof misconduct. The Consumer Financial Protection Bureau overseeslenders' compliance with the CARD Act.

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Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.