Citibank Settles With Regulators Over Debt Collection Practices

Citibank Settles With Regulators Over Debt Collection Practices
February 23, 2016, 06:25:00 PM EDT By Dow Jones Business News
WASHINGTON—The Consumer Financial Protection Bureau said Tuesday that it has reached two separate settlements with Citigroup Inc. over debt collection practices in its credit-card business, the latest step in the regulator’s expanding campaign to rein in tactics used by debt collectors.
In the first settlement, Citi agreed to refund $5 million to roughly 2,100 consumers and pay a $3 million penalty for allegedly selling credit-card debt with inaccurate and inflated interest rates to debt buyers between 2010 and 2013. The regulators said the bank failed to forward consumer payments promptly to the buyers of the debts, which were sold at steep discounts because repayment was deemed unlikely.
The second case was brought against Citi and two debt collection law firms that falsified documents filed in debt collection lawsuits. The CFPB said the false papers were filed in New Jersey state courts in 2011 without the bank’s knowledge. Under the agreement, the CFPB ordered Citi to comply with a New Jersey state court order to refund $11 million to consumers and forgo collecting about $34 million from nearly 7,000 consumers. The bank has already made those payments.
Tuesday’s actions represent the latest​steps in the CFPB’s effort to curb aggressive debt collecting practices, the largest source of consumer complaints received by the watchdog agency. Within the next few months, the bureau is expected to propose a rule to regulate the industry. It also has pursued enforcement cases in recent months.
In a case similar to but significantly more costly than Citi’s, the agency, along with attorneys general from 47 states, reached a $136 million settlement in July with J.P. Morgan Chase & Co. The bank was accused of relying on so- called robo-signing, in which legal documents are approved without proper review, and other methods of collecting debt from consumers who may not have owed the debt.
The bureau also settled in September with the nations’ two largest debt collectors, Encore Capital Group and Portfolio Recovery Associates, over their practices. That was followed in December by filing of a consent order against a Georgia law firm for allegedly operating an “illegal debt collection lawsuit mill.”
As he announced the bureau’s actions against Encore and PRA, CFPB Director Richard Cordray outlined the bureau’s broader strategy, saying both enforcement actions and rule making “are efforts to address certain common problems, such as data integrity, the substantiation of debts, and collection of time-barred debt.”
Write to Yuka Hayashi at
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