Banking giant Citibank has recently reached a settlement to resolve a class action lawsuit alleging that it broke federal lending laws when it suspended (or cut) home equity lines or credit during the 2008 mortgage crisis. As home values suddenly plummeted, thousands of homeowners received notification that their homes had significantly declined in value (when they had not).
Because of this, Citibank wanted to limit its exposure to risk (through potential lien stripping actions). The lender also sought to release its obligation to low market interest loans so that it could initiate rates commiserate with the changing marketplace.
Affected homeowners brought suit in 2009 (In Re: Citibank HELOC Reduction Litigation). According to the settlement, all U.S. Citibank customers who held (or initiated) a HELOC between January 1, 2008 and January 1, 2012 and had their line of credit reduced (or suspended) by a perceived reduction in value would be included in the class. Members of the class will be eligible for a number of benefits, including a cash award of $120 and the ability to reinstate their credit line, depending on the circumstances.
Citibank claims no wrongdoing in agreeing to the settlement.
In the meantime, former and current Citibank customers should receive notice of the settlement and detailed explanations of their options. The settlement is yet another ruling where consumers were vindicated after a large institutional lender allegedly broke the law in order to save money. It also follows a multi-billion settlement based on illegal foreclosures that occurred after the housing market crash.
Source: TopClassActions.com, Citibank HELOC Class Action Settlement, November 19, 2012