Citibank Ordered to Pay Refunds and Civil Penalties for Illegal Debt Sales, Collection Practices
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Citibank Ordered to Pay Refunds and Civil Penalties for Illegal Debt Sales, Collection Practices

February 24, 2016

Citibank is in hot water with financial regulators for illegal sales and debt collection practices.

As part of two separate legal actions, the Consumer Financial Protection Bureau (CFPB) is ordering Citibank to provide tens of millions of dollars in consumer relief, consumer refunds, and civil penalties. The company is charged with selling credit card debt with inflated interest rates, failing to forward consumer payments to debt buyers and falsifying court documents filed in debt collection cases.

Citibank's Illegal Debt Sales

Between February 2010 and June 2013 Citibank provided inaccurate and inflated APR information for almost 130,000 credit card accounts it sold to debt buyers. In some cases Citibank claimed the APR was 29 percent when it was actually 0. More than 15 debt buyers used these exaggerated rates when they tried to collect on the debt.

About 14,000 customers who tried to pay off their debt through Citibank saw a delay in these payments posting to their accounts. Debt buyers continued to collect on debt that was no longer owed.

As part of this order, Citibank would be required to refund about $4.89 million to the 2,100 customers whose debt included inflated APR and pay a $3 million civil penalty. Citibank must accurately document the debt it sells, stop selling debt it can't verify and include debt protections in sales contracts.

Law Firm Altered Affidavits

In a separate action the CFPB claims that Citibank, Citibank, two of its affiliates – Department Stores National Bank and CitiFinancial Servicing, LLC – and two debt collection law firms altered affidavits filed in debt collection lawsuits.

Citibank filed sworn statements attesting to the accuracy of the debt and then provided the statements to their attorneys to file with New Jersey courts. The law firms altered the dates of the affidavits, the amount of the debt, after the affidavits were executed.

The company did stop referring new credit cards accounts to one law firm after it learned of the practices.

As part of the order, Citibank has to comply with a New Jersey court order, in which the bank had to refund $11 million collected from consumers and stop collection of an additional $34 million in debts. Citibank has complied with both of these orders. The two law firms, Solomon & Solomon, P.C. and Faloni & Associates, LLC must pay civil penalties of $65,000 and $15,000, respectively.

More information about each case can be found on the CFPB website.