09/21/2012 11:31:00 AM EST
BuckleySandler LLP: Lender Settles TILA, UDAP Claims Over HELOC Reductions
Excerpted from BuckleySandler LLP's InfoBytes Blog, which monitors and reports on news, legal developments and legislative actions affecting the financial services industry. For more Infobytes, click here: http://www.infobytesblog.com/.
On August 31, a lender preliminarily settled with a class of borrowers who
claimed that the bank suspended or reduced borrower home equity lines of credit
(HELOCs) in violation of the Truth in Lending Act and California's Unfair
Competition Law. Plaintiffs' Notice of Motion and Motion for Preliminary
Approval of Class Action Settlement Agreement, In Re Citibank HELOC
Reduction Litig., No. 09-350 (N.D. Cal. Aug. 31, 2012). The borrowers
claimed that the bank improperly utilized computerized automated valuation
models (AVMs) as the basis for suspending or decreasing customer HELOCs because
of the decline in the value of the underlying property. The complaint also charged that customers were injured
because (i) the annual fee to maintain the HELOC was not adjusted to account
for the decreased limit, and (ii) the borrowers' credit ratings were damaged as
a result of the reduced credit limit. The named plaintiff also alleged
injury because he was forced to obtain a replacement home equity line, which
resulted in payment of an early termination fee on the old HELOC and additional
costs related to the new HELOC. Under the agreement, class members will
have a right to request reinstatement of their HELOC accounts, the bank will
expand the information contained in credit-line reduction notices based on
collateral deterioration, and customers who incurred an early closure release
fee when closing the account subsequent to the suspension or reduction may make
a claim for the cash payment of $120.
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