Banking and Finance Law Daily Citibank settles two separate CFPB debt collection administrative actions
Tuesday, February 23, 2016

Citibank settles two separate CFPB debt collection administrative actions

By Richard A. Roth, J.D.

Citibank has agreed to settle two enforcement actions brought by the Consumer Financial Protection Bureau under the Fair Debt Collection Practices Act and the bureau’s authority to deal with unfair, deceptive, or abusive acts and practices. In one case, the CFPB claims that Citibank inflated credit card interest rates when it sold charged-off accounts to debt buyers and that the bank failed to forward subsequent payments to the debt buyers. In the other, the bureau claims that Citibank, two affiliates, and two debt collection law firms used altered affidavits in debt collection suits. Although it has agreed to the settlements, Citibank has not admitted any violations in either matter, the bureau noted.

Debt sales. According to the consent order settling the first administrative proceeding, Citibank inflated the annual percentage rates when, over a three-year period beginning in 2010, it sold charged-off credit card accounts to debt buyers. The debt buyers, in turn, used the inflated APRs in their collection efforts. More than 128,000 accounts were affected, and consumers paid the debt buyers close to $5 million. In the most egregious cases, Citibank inflated 0-percent promotional APRs to 29 percent.

Citibank also failed to forward to the debt buyers payments it had received from consumers. Nearly 14,000 payments, totaling nearly $1 million, were improperly held by Citibank, meaning that the consumers were subjected to collection demands after they paid their debts.

To settle the charges, Citibank has agreed to provide consumer redress and to pay a $3 million civil penalty.

Affidavits. The consent order in the second enforcement proceeding resolves charges that law firms used by Citibank and two affiliates—CitiFinancial Servicing, LLC, and Department Stores National Bank—altered affidavits that had been provided by Citibank personnel and then used the affidavits in collection suits. According to the bureau, the law firms altered dates, balances due, or both, which constituted misrepresentations under the Fair Debt Collection Practices Act.

Citibank will not pay any civil penalties in the second settlement due to its cooperation with the CFPB and the efforts it already has taken to make affected borrowers whole. The consent order only requires the bank and its affiliates to comply with a New Jersey state court order that they refund $11 million to consumers and stop attempts to collect an additional $34 million. The bank already has done so, the bureau said.

The two law firms also settled charges based on the bureau’s claims. Without agreeing that any violations were committed:

Companies: Citibank; CitiFinancial Servicing, LLC; Department Stores National Bank; Faloni & Associates, LLC; Solomon & Solomon, P.C.

MainStory: TopStory CFPB DebtCollection EnforcementActions NewJerseyNews

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