CFPB Fines Citibank for Debt Collection and Sales Practices

February 25, 2016, Written By John H. Oldshue
BUDAPEST, HUNGARY - JANUARY 15, 2014: Citibank in Budapest Hungary. Citibank is banking division of financial services multinational Citigroup founded in in 1812 as the City Bank of New York.

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On Tuesday, the Consumer Financial Protection Bureau (CFPB) ordered Citibank to provide $5 million in consumer debt relief and pay a $3 million penalty for failing to forward consumer payments to debt buyers and for selling credit card debt with inflated interest rates.

In a second action, Citibank and two debt collection law firms were fined for falsifying court documents filed in New Jersey debt collection cases. Citibank must refund $11 million to consumers and forgo collecting an additional $34 million from nearly 7,000 customers.

Illegal Debt Sales Practices
From February 2010 until June 2013, the CFPB claims Citibank provided inaccurate and inflated APR information when it sold 130,000 credit card accounts to debt buyers. In some cases, Citibank claimed the APR was 29% when it was actually 0%. In turn, the buyers used these high APRs in their attempts to collect the debt.

Citibank also failed to forward 14,000 customer payments, totaling almost $1 million, to the debt buyers.

The CFPB found these actions violated the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act, so Citibank must:

  • Refund all payments that consumers made to debt buyers that referenced an inflated APR. This refund will provide $4.89 million to 2,100 consumers.
  • Provide certain documents whenever it sells debt, including a credit card agreement and recent account statements. If Citibank cannot provide the appropriate documentation, it cannot sell the debt.
  • Include certain protections in debt sales contracts, which prohibit the buyer from reselling the debt.
  • Provide consumers with documentation about the sale of their debt. This information will include the original creditor, the credit agreement and recent account statements.
  • Pay $3 million to the CFPB’s Civil Penalty Fund

“Citibank sent inaccurate information to buyers when it sold off credit card debt and it also used law firms that altered court documents,” said CFPB Director Richard Cordray. “Today’s action provides redress to consumers who were victimized by slipshod practices as part of our ongoing work to fight abuses in the debt collection market.”

Altered Affidavits
The CFPB also took action against Citibank, two of its affiliates (Department Stores National Bank and CitiFinancial Servicing, LLC) and two debt collection law firms (Faloni & Associates, LLC and Solomon & Solomon, P.C.) for altering affidavits filed in debt collection lawsuits in New Jersey.

Citibank filed sworn statements attesting to the accuracy of debts owed. In violation of the Fair Debt Collection Practices Act, the two law firms altered the dates on these affidavits, the amount of debt allegedly owed, or both.

When Citibank learned in May 2011 that the firms had altered the court documents, the bank stopped sending one firm new credit card accounts and requested that pending actions be dismissed. On September 12, 2011, a New Jersey court dismissed the actions.

The Order issued from these cases requires Citibank to refund $11 million collected from consumers and forgive an additional $34 million in debts, which Citibank has done. Solomon & Solomon, P.C., must pay a $65,000 penalty to the CFPB’s Civil Penalty Fund, and Faloni & Associates, LLC, must pay $15,000.

The CFPB did not charge Citibank civil penalties for this violation, as the bank made an attempt to recompense affected consumers.



The information contained within this article was accurate as of February 25, 2016. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.