Citibank Settles Home Equity Credit Lines Class Action

Citibank Settles Home Equity Credit Lines Class Action

SAN FRANCISCO - (Mealey's) Citibank NA on Friday settled a class action suit alleging that it wrongfully suspended or decreased the value of home equity lines of credit (HELOC), according to a document filed by the plaintiffs in a California federal court (In re:  Citibank HELOC Reduction Litigation, No. 09-00350, N.D. Calif.).

The settlement is subject to the approval of U.S. Judge Maxine M. Chesney of the Northern District of California. 

A total dollar value of the settlement was not available, but borrowers will each be entitled to recover $120 from Citibank to resolve claims that their loans were devalued or canceled based on faulty calculations, according to a motion for preliminary approval of class action settlement filed by the plaintiffs. 

Settlement Details

According to the plaintiffs' second amended consolidated complaint, Citibank sent letters to homeowners with outstanding HELOCs notifying them that the value of the loans were being summarily reduced.  The calculations the bank used were based on "dubious automated valuation models," according to the plaintiffs. 

"These self-serving [automated valuation models] were specifically tailored to serve Citibank's unlawful purpose of manufacturing a basis to decrease or suspend homeowners' HELOC loans to protect Citibank's own financial interests associated with the downside risk of the declining housing market and to get rid of the low interest rate HELOC loans," the plaintiffs said in the complaint.

Under the terms of the settlement, Citibank agreed to modify some of its home equity loan practices, including a guarantee not to impose new standards on HELOCs that would hurt consumers.  Additionally, plaintiffs' counsel will receive approximately $1.2 million in fees and expenses.

According to the motion for approval of the settlement, the parties have agreed to the certification of a settlement class defined as "[a]ll persons in the United States from January 1, 2008 to January 31, 2012 whose Citibank HELOC Accounts were suspended or reduced based on a claim by Citibank of Collateral Deterioration regarding the value of the property securing the HELOC."  The class representatives in the suit are David Levin, Loren S. Siegel, Gary Cohen, Marie Cohen, Mark Winkler and Jennie Lapointe.

Attorneys

The plaintiffs are represented by Sean P. Reis in Rancho Santa Margarita, Calif., and Jay Edelson, Steven L. Woodrow and Evan Meyers in Chicago, all of Edelson McGuire, and James Patterson of Patterson Law Group in San Diego. 

Citibank is represented by Christopher Paul Murphy, Lisa Walgenbach Cornehl and Steven Edward Rich in Los Angeles and Andrew S. Rosenman, Debra Lee Bogo-Ernst and Lucia Nale in Chicago, all of Mayer Brown.

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