The Consumer Financial Protection Bureau took two separate actions against Citibank for illegal debt sales and debt collection practices. The CFPB ordered Citibank to pay $5 million in consumer relief and a $3 million penalty for selling credit card debt with inflated interest rates. CFPB also alleges that Citibank failed to forward consumer payments promptly to debt buyers. Citibank and two debt collection law firms in New Jersey also are the subject of the CFPB action because they filed falsified court documents in New Jersey state courts. For these actions the law firms and Citibank have been ordered to refund $11 million to consumers.
Citibank is a national bank with its headquarters in New York, NY. It is the world’s largest credit card issuer, with 139 million accounts, $375 billion in annual purchase sales, and $142 billion in average receivables across Citi Branded Cards and Retail Services. From 2010-2013, the CFPB alleged that Citibank sold portfolios of charged-off credit card accounts. A “charged off” account is one the bank deems unlikely to be repaid, but may sell to a debt buyer, usually for a fraction of face value.
According to CFPB Director Richard Cordray this action, “provides redress to consumers who were victimized by slipshod practices” as part of the CFPB’s ongoing fight against abuse of consumers in the debt collection market. From February 2010 until June 2013, Citibank provided “inaccurate and inflated” APR information for approximately 130,000 consumer accounts. The alleged violations of the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act include overstating the annual percentage rate in accounts sold to debt buyers and delayed sending of payments to debt buyers. For some accounts, Citibank claimed the APR was 29 percent when the actual APR was 0 percent. These overstatements resulted in $4.89 million wrongfully paid to debt buyers. Additionally, Citibank delayed nearly 14,000 payments from 2010 to 2013. These delays subjected consumers to possible collection actions on debts that had actually been paid.
This action will refund over 2,100 consumers an estimated $4.89 million for the payments made in reference to inflated APR from February 2010 to November 2013. Citibank must accurately document the debt it sells and must provide debt buyers with documents including credit agreements and recent account statements. Additionally, Citibank may not sell debt that cannot be verified by documentation, if consumers have alleged identity theft, or if consumer have alleged that they do not owe the amount claimed. Likewise, if an account is nearing the 150 day statute of limitations, Citibank may not sell this debt. Upon selling a debt, a consumer must be given information about the debt and the debt buyer, including the name of the original creditor, the credit agreement, and recent account statements.