Citigroup’s Crime Spree Against Americans Continues With Slaps on the Wrist

By Pam Martens and Russ Martens

Last week, the Consumer Financial Protection Bureau (CFPB) charged two units of the Wall Street mega bank, Citigroup, with insidious fraudulent acts against homeowners while it imposed a modest $28.8 million in relief and penalties. The penalty portion of $7.4 million is meaningless because this is a bank that serially breaks the law, laughs at its regulators, and, most outrageously, it was simultaneously engaging in heinous misdeeds against Americans while the U.S. government was using taxpayer money to bail out its failed business model of brazen financial frauds. The $7.4 million in fines also stands in contrast to the $14.9 billion that Citigroup reported as net income for 2016.

We will get to the current CFPB charges in a moment, but first some necessary background. On May 20, 2015, Citigroup’s commercial banking unit, Citicorp, pled guilty to criminal charges brought by the U.S. Justice Department for its role in rigging foreign currency markets. The bank was fined $925 million. The conduct for which Citicorp was charged covered the period of December 2007 until at least January 2013. In addition to the fine, Citicorp was put on a three-year probation.

During the period of its criminal conduct, Citigroup and/or its various units were receiving the following from the taxpayer in the largest bailout of a bank in U.S. history: The U.S. Treasury infused $45 billion in capital into Citigroup to prevent its total collapse; the government guaranteed over $300 billion of Citigroup’s assets; the Federal Deposit Insurance Corporation (FDIC) guaranteed $5.75 billion of its senior unsecured debt and $26 billion of its commercial paper and interbank deposits; the Federal Reserve secretly funneled $2.5 trillion in almost zero-interest loans to units of Citigroup between 2007 and 2010. And those are just the details the public has been given thus far.

Simple logic would suggest that when a bank is a serial recidivist lawbreaker, the fines should be going up, not dramatically shrinking; its top management should be ousted and a new Board appointed. None of that is happening. For example, the Justice Department’s 2015 fine of $925 million is 125 times more than the CFPB just charged Citigroup’s two units.

The two units of Citigroup the CFPB charged yesterday are CitiFinancial Servicing and CitiMortgage, Inc. The period for which the CFPB alleges fraudulent acts were committed by CitiMortgage was during most of 2014. The period for which the CFPB alleges fraudulent acts were committed by CitiFinancial Servicing covers July 2011 through April 30, 2015 – stopping suspiciously short by just one month of the date the Justice Department charged Citigroup’s Citicorp with a criminal felony and placed it on a three-year probation — where it could be indicted and prosecuted if it committed further crimes.

Among the brazenly fraudulent acts against the public that the CFPB charges against CitiFinancial Servicing are the following:

  • Misled consumers about the impact of deferring payment due dates: Consumers were kept in the dark about the true impact of postponing a payment due date. CitiFinancial Servicing misled borrowers into thinking that if they deferred the payment, the additional interest would be added to the end of the loan rather than become due when the deferment ended. In fact, the deferred interest became due immediately. As a result, more of the borrowers’ payment went to pay interest on the loan instead of principal when they resumed making payments. This made it harder for borrowers to pay down their loan principal.
  • Charged consumers for credit insurance that should have been canceled: Some borrowers bought CitiFinancial Servicing credit insurance, which is meant to cover the loan if the borrower can’t make the payments. Borrowers paid the credit insurance premium as part of their mortgage payment. Under its terms, CitiFinancial Servicing was supposed to cancel the insurance if the borrower missed four or more monthly payments. But between July 2011 and April 30, 2015, about 7,800 borrowers paid for credit insurance that CitiFinancial Servicing should have canceled under those terms. These payments were still directed to insurance premiums instead of unpaid interest, making it harder for borrowers to pay down their loan principal.
  • Prematurely canceled credit insurance for some borrowers: CitiFinancial Servicing prematurely canceled credit insurance for some consumers. Some of those borrowers later had claims denied because CitiFinancial Servicing had improperly canceled their insurance.

The charges against CitiMortgage pertain to the firm demanding spurious documents from borrowers who had requested foreclosure relief as allowed under law. The CFPB stated that CitiMortgage demanded “dozens of documents and forms that had no bearing on the application or that the consumer had already provided. Many of these documents had nothing to do with a borrower’s financial circumstances and were actually not needed to complete the application.” The CFPB adds that: “Letters sent to borrowers in 2014 requested documents with descriptions such as ‘teacher contract,’ and ‘Social Security award letter.’ CitiMortgage sent such letters to about 41,000 consumers.”

The Consumer Financial Protection Bureau is a critical agency that was created under the Dodd-Frank financial reform legislation of 2010 to protect the consumer from predatory financial institutions. It typically does an exceptional job in fulfilling its mandate. But clearly, as the chronology below will attest, slaps on the wrist don’t work when it comes to the Wall Street behemoth Citigroup.


Below is just a sampling of charges brought against Citigroup and/or its various units since December 2008:

December 11, 2008: SEC forces Citigroup and UBS to buy back $30 billion in auction rate securities that were improperly sold to investors through misleading information.

February 11, 2009: Citigroup agrees to settle lawsuit brought by WorldCom investors for $2.65 billion.

July 29, 2010: SEC settles with Citigroup for $75 million over its misleading statements to investors that it had reduced its exposure to subprime mortgages to $13 billion when in fact the exposure was over $50 billion.

October 19, 2011: SEC agrees to settle with Citigroup for $285 million over claims it misled investors in a $1 billion financial product.  Citigroup had selected approximately half the assets and was betting they would decline in value.

February 9, 2012: Citigroup agrees to pay $2.2 billion as its portion of the nationwide settlement of bank foreclosure fraud.

August 29, 2012: Citigroup agrees to settle a class action lawsuit for $590 million over claims it withheld from shareholders’ knowledge that it had far greater exposure to subprime debt than it was reporting.

July 1, 2013: Citigroup agrees to pay Fannie Mae $968 million for selling it toxic mortgage loans.

September 25, 2013: Citigroup agrees to pay Freddie Mac $395 million to settle claims it sold it toxic mortgages.

December 4, 2013: Citigroup admits to participating in the Yen Libor financial derivatives cartel to the European Commission and accepts a fine of $95 million.

July 14, 2014: The U.S. Department of Justice announces a $7 billion settlement with Citigroup for selling toxic mortgages to investors. Attorney General Eric Holder called the bank’s conduct “egregious,” adding, “As a result of their assurances that toxic financial products were sound, Citigroup was able to expand its market share and increase profits.”

November 2014: Citigroup pays more than $1 billion to settle civil allegations with regulators that it manipulated foreign currency markets. Other global banks settled at the same time.

May 20, 2015: Citicorp, a unit of Citigroup becomes an admitted felon by pleading guilty to a felony charge in the matter of rigging foreign currency trading, paying a fine of $925 million to the Justice Department and $342 million to the Federal Reserve for a total of $1.267 billion. The prior November it paid U.S. and U.K. regulators an additional $1.02 billion.

May 25, 2016: Citigroup agrees to pay $425 million to resolve claims brought by the Commodity Futures Trading Commission that it had rigged interest-rate benchmarks, including ISDAfix, from 2007 to 2012.

July 12, 2016: The Securities and Exchange Commission fined Citigroup Global Markets Inc. $7 million for failure to provide accurate trading records over a period of 15 years. According to the SEC: “CGMI failed to produce records for 26,810 securities transactions comprising over 291 million shares of stock and options in response to 2,382 EBS requests made by Commission staff, between May 1999 and April 2014, due to an error in the computer code for CGMI’s EBS response software. Despite discovering the error in late April 2014, CGMI did not report the issue to Commission staff or take steps to produce the omitted data until nine months later on January 27, 2015. CGMI’s failure to discover the coding error and to produce the missing data for many years potentially impacted numerous Commission investigations.”

5 Responses

  1. My Appeal was filed last week could take 6 months to 1 year before the Appellate Division decides my Appeal. The Trial Court granted the servicer Wells Fargo Summary Judgment , stating that my timely TILA Rescission did not mention that I was offering to pay Tender . the Plaintiff had never raised that argument, they simply stated that we did not have a right to rescind ..but they never produced any evidence such as the signed acknowledgments ..they said that after 3 years you can’t raise that you rescinded ..the court agreed …then I motioned for the Court to reconsider in light of Jesinoski …the court denied my motion and said I had never offered the tender in my Rescission letter.
    So my Appeal is filed …. But today the Sheriffs Sale date was placed on my front door … March 21, 2017
    I am allowed 2 statutory stays ..each stay is for 2 weeks
    What should I do next?
    If I motion for the trial court to stay pending appeal they will most likely deny the motion… Then I can ask the Appeal Court to stay ..but not sure if they would without me putting up money or bond ..
    Should we consider filing a Bankruptcy with adversarial pleading against Wells Fargo as an unsecured creditor?
    Hate to lose the house while my TILA Rescission is under appeal

  2. In 2010 while working on short sale on my personal residence, Citi somehow foreclosed (dual tracking). Here’s the good part. After they foreclosured, the home was sold to the same client I had under contract at $380K, with a promise to go higher if bank insisted, and she bought it at a lower price than her original offer. Hosed by all!

  3. Banks have blamed a never ending flow of
    Fraud on homeowners who took out mortgages they couldn’t pay back. How far can this lie stretch to cover up national and
    Global scale fraud by banks. I suppose it’s what our entire economy has been founded on.

  4. Reblogged this on Legal blog from Stan Burman.

  5. Sing..Sing A Song that makes you Happy All Day Long….


    Somebody’s gonna give you back ..what you’ve been giving …
    and ‘m going to be around to watch them bring yow down…….

    Its like you to use them and its like you to abuse them, its like you to do that sort of thing.



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