According to the proposal, the bank would change its lending practices and would also expand disclosures in notices. Borrowers who closed a HELOC after receiving a reduction or closure notice from the bank, and incurred an early closure fee, would have an option to receive a $120 cash payment from the bank.
The proposal for settlement needs court approval and includes borrowers whose HELOC accounts were suspended or reduced between January 1, 2008 and January 31, 2012. Citi spokesman Mark Rodgers said, “Citi is pleased to have this matter resolved.”
The lawsuit claimed that Citigroup had started suspending or reducing HELOC of borrowers upon alleged drops in values of their homes, when such was often not the case. The plaintiffs claimed that the notices of suspension and reduction of HELOC were simply a “thinly-veiled, unlawful attempt to limit its exposure to the risk of collapse in the United States housing market ad to rid itself of below-market interest rate loans.”
The law firm representing the plaintiffs is apparently seeking as much as $1.21 million to cover legal fees and expenses. The settlement is the latest in a series of such settlements made by the bank in relation with its questionable housing practices. On Wednesday the Citigroup had announce another settlement amounting to $590 million to stop probes into its practices of hiding toxic mortgage assets from investors.
The case is Citibank HELOC Reduction Litigation, U.S. District Court, Northern District of California, No. 09-00350.
