Home / Compliance / Collection Firm Sues Citibank For Non-Payment of Collection Fees for $40 Million of Forgiven Loans

Collection Firm Sues Citibank For Non-Payment of Collection Fees for $40 Million of Forgiven Loans

Citibank has not paid a collection law firm $8 million it is owed as part of an agreement to collect on delinquent second mortgages, according to a copy of a complaint filed in a New Jersey Superior Court.

Citibank has filed a motion to have the case removed to federal court. It is being sued by Faloni & Associates for allegedly not paying $8,021,002.50, or 19% of a $40 million credit that Citi received as part of the national mortgage settlement.

The national mortgage settlement involved five banks — Citi, Bank of America, JPMorgan Chase, Wells Fargo, and Ally Financial — the federal government, and 49 states (all but Oklahoma). The banks were accused of robe-signing mortgage foreclosure documents, evicting homeowners without first properly reviewing the cases, which were still in the loan modification process following the housing crisis that started in 2008.

As part of the settlement, the five institutions were required to provide $20 billion in relief to consumers and $5 billion in other fines and penalties.

Citi received a credit from the federal government — for loans where the bank had decided to extinguish the debt — as part of the national mortgage settlement. About $40 million worth of the extinguished loans had been placed with the plaintiff for collection, according to the complaint. The plaintiff billed the defendant for its 19% commission — $8,021,002.50 — but has yet to receive a dime, according to the complaint.

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