Citibank Will Stop Collecting $34 Million in Credit Card Debt

 Certain Credit Card Debtors Are In for Some Relief.

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Citibank has agreed to provide nearly $16 million in consumer relief and forego collecting on about $34 million in debt held by 7,000 cardholders as part of two enforcement actions by the Consumer Financial Protection Bureau (CFPB).

Violations

In the first action, the CFPB found that Citibank violated the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act by selling credit card debt with inflated interest rates and for failing to forward consumer payments promptly to debt buyers.

From February 2010 until June 2013, Citibank sold almost 130,000 charged-off credit card accounts to debt buyers with inflated interest rates (APR), in some cases inflated to 29% instead of 0%. The bank also failed to forward consumer payments promptly to the debt buyers as they try to collect on the accounts, delaying the updating of account balances so that consumers who had already paid their accounts still were the subjects of collection efforts.

In the second action, the CFPB found that two law firms the bank hired to collect credit card debts on its behalf in New Jersey courts violated the Fair Debt Collection Practices Act when they altered affidavits in debt collection cases. Faloni & Associates, LLC, of Fairfield, N.J., and Solomon & Solomon, P.C. of Albany, N.Y., changed the dates of the affidavits, as well as, the amount of debt owed, according to the CFPB.

Penalty

Citibank was ordered to refund almost $5 million to consumers and pay a $3 million penalty to CFPB’s Civil Penalty Fund for the first violation. For the second violation, the bank and law firms were ordered to comply with a court order to refund $11 million to consumers and forego the collection of an additional $34 million in debts.

The law firms also had to pay civil penalties. Solomon & Solomon, P.C., must pay $65,000 and Faloni & Associates, LLC, must pay $15,000 to the CFPB’s Civil Penalty Fund.

In addition to the monetary penalties, Citibank must stop selling debt it cannot verify, including protections that prohibit debt buyers from reselling the debt and provide basic consumer information, including the name of the original creditor, the credit agreement and recent account statements.

Neither the bank nor the law firms admitted any wrongdoing as part of the enforcement actions.

The CFPB has been focusing on debt collection practices in recent years and has targeted some of the large corporations. In 2014 JPMorgan Chase was fined $216 million for selling bad credit card debt and illegally robo-signing courts documents. And America Express was fined back in 2012 for illegal credit card debt collection practices. “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”, the CFPB said.

 

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