Citibank Slapped on the Wrist Over Debt Collections and sales of Debt to Junk Debt Buyers

By: Robert J. Nahoum

A man in suit and tie with his arms crossed.

According to a report by USA Today “Citibank was ordered to pay a $3 million penalty and provide nearly $11 million in consumer relief or refunds in a settlement over illegal debt sales and debt collection practices, a federal consumer agency said Tuesday.

The New York-based bank broke the law by selling credit card debt with inflated interest rates and failing to forward consumer payments promptly to debt buyers, the Consumer Financial Protection Bureau said in a consent order.

Additionally, Citibank and two debt collection law firms that worked with the bank falsified court records filed in debt collection cases in New Jersey state courts, the CFPB said.

‘Today’s action provides redress to consumers who were victimized by slipshod practices,’ said CFPB Director Richard Cordray.

Citibank spokeswoman Jennifer Bombardier said the bank was ‘pleased to resolve these legacy issues, which impacted a small percentage of customers in the U.S.’

The debt sales in question involved portfolios of charged-off credit card accounts that Citibank sold to buyers from 2010 to 2013. The debts, which the bank deemed unlikely to be repaid, were sold to debt buyers who tried to collect on the accounts. The CFPB said the bank:

Overstated the annual percentage rate in accounts sold to debt buyers. As a result, consumers paid approximately $4.89 million to debt buyers that used a rate that had been inflated by more than 1%.

Delayed forwarding to debt buyers nearly 14,000 consumer payments that totaled nearly $1 million. The delays subjected consumers to collection efforts after they had already paid off their accounts.

The CFPB settlement requires Citibank to repay the $4.89 million to victimized consumers and pay a $3 million fine to the consumer agency’s civil penalty fund.

Separately, Citibank and two affiliates, Department Stores National Bank and CitFinancial Servicing, filed sworn statements that attested to the amounts allegedly owed by consumers. Citibank provided the affidavits to two debt-collection law firms, Faloni & Associates of Fairfield, N.J. and Solomon & Solomon, of Albany, N.Y. to collect credit card debt for the bank in New Jersey state courts.

However, the CFPB said the law firms altered affidavit dates, the amount of debt purportedly owed, or both, after the affidavits had been executed.

The consumer agency said Citibank must comply with a New Jersey state court order that required the bank to refund $11 million collected from consumers and halt collections on $34 million

The law firms collectively must pay $80,000 in penalties, the consumer agency said.â€


If you need help settling or defending a debt collection law suit, stopping harassing debt collectors or suing a debt collector, contact us today to see what we can do for you.  With office located in the Bronx, Brooklyn and Rockland County, the Law Offices of Robert J. Nahoum defends consumers in debt collection cases throughout the Tristate area including New Jersey.

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