The Consumer Financial Protection Bureau (CFPB) has recently charged Citigroup Inc. (Citi), an American multinational investment banking and financial services corporation, with fines and restitution.
According to Richard Cordray, CFPB Director, the bureau is currently developing new rules for the debt collection industry.
The fine ($8 million) and restitution were imposed based on the following facts. The company was supposed to have been selling credit card debt with inflated interest rate, without sending payments made by consumers to debt buyers.
The CFPB ordered Citibank Inc. to give consumers a refund of $11 million, according to a New Jersey state court order. Also, Citi was ordered to stop collecting another $34 million in credit card debts from 7.000 consumers.
“Solomon & Solomon” in Albany, NY, and “Faloni & Associates” in Fairfield, NJ, 2 debt collection firms that had worked for Citibank, were also involved in the case. They were ordered to pay civil penalties because they’d made changes to the dates and amounts of debt owed by consumers.
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The reality is that Citibank had overstated the annual percentage rate of charge (APR) on accounts sold to 16 debt buyers. There were cases when the APR claimed by Citibank accounted for 29%, but it was zero, in fact. The wrong information was then used by the debt buyers to collect $4.9 million from consumers.
The CFPB ordered Citi to send $4.9 million as a refund to 2.100 consumers who paid their debt between February 1, 2010 – November 14, 2013.
Also, the New York bank must pay a $3 million penalty to the CFPB’s civil penalty fund.
What is more, Citibank delayed paying debt buyers almost $1 million received from 14.000 customers to. This was violating the Dodd-Frank Act.
In addition, Citibank cannot sell any debts without providing documentation and verification. Consumers must receive Citibank information about the debt from Citi. The information must include such details as the name of the credit agreement, original creditor, and the account statements.
The CFPB ordered the New York bank to add provisions to the contract with debt sellers, which wouldn’t allow buyers to resell the debt.
Finally, the bureau ordered 2 debt collection law firms to pay civil penalties as they had altered affidavits and the debt amount allegedly owed. This was violating the Fair Debt Collection Practices Act. As a result, “Solomon & Solomon” and “Faloni & Associates” must pay $65.000 and $15.000 correspondingly.