CitiFinancial to Pay Nearly $1 Million for Illegal Repossessions

  • Emma Sandler
  • September 19, 2017
  • 0

The Justice Department said on Monday that CitiFinancial Credit Co. — a successor to CitiFinancial Auto Corp. — will pay $907,000 to resolve allegations that it violated the Servicemembers Civil Relief Act.

Between 2007 and 2010, CitiFinancial repossessed 164 cars owned by SCRA-protected servicemembers without first obtaining the required court orders, according to a DOJ press release.

“Citi values its relationship with all servicemembers, and we deeply regret that we fell short of providing best-in-class service to them,” Mark Costiglio, head of financial communications at Citigroup Inc., told Auto Finance News in a statement. “We apologize for the actions that led to this settlement.”

During the investigation, the DOJ learned that CitiFinancial conducted repossessions without court orders — even when CitiFinancial had evidence in its own records suggesting that a borrower could be a protected servicemember. In several cases, loan servicing notes indicated that CitiFinancial was informed that the borrower was an active-duty servicemember or had received orders to report for military service. However, CitiFinancial allegedly continued repossession efforts for the servicemembers’ vehicles.

CitiFinancial Auto Corp. originated and serviced these auto loans until 2010 when operations and assets were sold to Santander Consumer USA.

In February 2015, the DOJ reached a $9.3 million settlement with Santander for allegations that it had violated the SCRA. The settlement required the subprime lender to repair the credit and pay $10,000 plus compensation for any lost equity (with interest) to affected servicemembers. The final settlement covers the allegedly improper repo of 1,112 motor vehicles between January 2008 and February 2013.

As part of the investigation of Santander’s repossession practices, the DOJ learned that CitiFinancial sold Santander the right to collect debts owed by servicemembers after their cars had been repossessed by CitiFinancial in violation of the SCRA.

CitiFinancial will pay $5,000 to each impacted servicemember, in addition to the Santander settlement. CitiFinancial must also pay $10,000 to one affected servicemember who did not receive partial compensation through the Santander settlement. In addition, CitiFinancial will pay $500 plus compensation for any lost equity (with interest) to affected servicemembers, and must take steps to repair the servicemembers’ credit.

Santander Consumer USA declined to comment for this story.

Notably, there have been numerous investigations and fines attached to the Servicemembers Civil Relief Act over the past few years. In addition to Santander, Wells Fargo & Co. was fined more than $24 million in 2015 and HSBC Finance Corp. paid $434,500 in 2016.

For more content like this, check out the 17th annual Auto Finance Summit, which will take place on Oct. 25-27 at the Wynn Las Vegas. To learn more about this year’s event — or to register — visit the Summit’s homepage here.

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