The CFPB on Tuesday took two separate actions against Citibank forillegal debt sales and debt collection practices. In the firstaction, the CFPB ordered Citibank to provide nearly $5 million inconsumer relief and pay a $3 million penalty for selling creditcard debt with inflated interest rates and for failing to forwardconsumer payments promptly to debt buyers.

The second action is against both Citibank and two debtcollection law firms it used that, according to the CFPB, falsifiedcourt documents filed in debt collection cases in New Jersey statecourts. The CFPB ordered Citibank and the law firms to comply witha court order that Citibank refund $11 million to consumers andforgo collecting about $34 million from nearly 7,000 consumers.

“Citibank sent inaccurate information to buyers when it sold offcredit card debt and it also used law firms that altered courtdocuments,” CFPB Director Richard Cordray said. “Today's actionprovides redress to consumers who were victimized by slipshodpractices as part of our ongoing work to fight abuses in the debtcollection market.”

Citibank broke the law when, from February 2010 until June 2013,it provided inaccurate and inflated APR information for almost130,000 credit card accounts it sold to debt buyers. These buyersthen used the exaggerated APR in debt collection attempts. Citibankalso failed to promptly forward to debt buyers approximately 14,000customer payments totaling almost $1 million. The CFPB foundthat Citibank violated the Dodd-Frank Wall Street Reform andConsumer Financial Protection Act. Specifically, Citibank:

• Overstated the annual percentage rate in accounts soldto debt buyers: Between February 2010 and June 2013,Citibank overstated the APR for 128,809 accounts it sold to 16different debt buyers. For some accounts, Citibank claimed the APRwas 29% when it was actually 0%. Consumers paid about $4.89 millionto debt buyers who used an APR inflated by more than 1% incollection efforts.
• Delayed sending consumer payments to debtbuyers: From 2010 to 2013, Citibank delayedforwarding to debt buyers nearly 14,000 payments made by consumers,totaling almost $1 million. This delayed the updating of accountbalances and subjected consumers to collection efforts from debtbuyers after they had already, in reality, paid off theiraccount.

Under the Dodd-Frank Act, the CFPB has theauthority to take action against institutions or individualsengaged in unfair, deceptive, or abusive acts or practices. Under theCFPB's order addressing illegal debt sales practices, Citibankmust:

• Refund an estimated $4.89 million to roughly 2,100consumers: Citibank must refund all paymentsconsumers made from Feb. 1, 2010 to Nov. 14, 2013 to debt buyersthat referenced an inflated APR provided by Citibank in theircollection efforts where the discrepancy was more than 1percent.
• Accurately document the debt itsells: Citibank must provide certain accountdocuments when it sells debt, such as the credit agreement andrecent account statements.
• Stop selling debt it cannotverify: Citibank cannot sell debts if it cannotprovide documentation, if the consumers notified Citibank ofidentity theft or unauthorized use, if consumers allege in writingthat they do not owe the amount claimed, or if the accountis within 150 days of the end of the statute oflimitations.
• Include certain protections in debt salescontracts: Citibank must include provisions in itsdebt sales contracts prohibiting the debt buyer from reselling thedebt.
• Provide consumers with basic information about thedebt: When it sells a debt, Citibank must giveconsumers information about the debt, such as the name of theoriginal creditor, the credit agreement, and recent accountstatements.
• Pay civil money penalties: Citibank mustpay a $3 million penalty to the CFPB's Civil Penalty Fund.

Separately, the CFPB is taking action today against Citibank,two of its affiliates – Department Stores National Bank andCitiFinancial Servicing, LLC – and two debt collection law firmsfor altering affidavits filed in debt collection lawsuits. Citibankretained Faloni & Associates, LLC, of Fairfield, N.J., andSolomon & Solomon, P.C., of Albany, N.Y. to collect credit carddebt on its behalf in New Jersey state courts.

Citibank filed sworn statements attesting to the accuracy of thedebt allegedly owed. Citibank then provided the affidavits to theirattorneys to file with New Jersey courts. The two firms retained byCitibank altered the dates of the affidavits, the amount of thedebt allegedly owed, or both, after the affidavits wereexecuted. This violated the Fair Debt Collection PracticesAct.

In May 2011, Citibank learned that one of its law firms hadaltered affidavits and stopped referring new credit card accountsto it. At Citibank's request, a New Jersey court dismissed actionspending as of Sept. 12, 2011 that Citibank identified as involvingaltered affidavits or incorrect information.

The CFPB's order requires Citibank to comply with the New Jerseystate court order, in which Citibank had to refund $11 millioncollected from consumers and stop collection of an additional $34million in debts, both of which Citibank has done. Solomon &Solomon, P.C., must pay a $65,000 penalty to the Bureau's CivilPenalty Fund. Faloni & Associates, LLC, must pay $15,000.