A debt buyer has filed suit against Citigroup, accusing the mega-bank of a “classic ‘bait and switch’ ” by promising to sell delinquent credit card portfolios containing accounts with certain characteristics, but instead putting accounts into the portfolios that had a much lower chance of recovery.
A copy of the complaint in the case of Absolute Resolutions Investments v. Citigroup can be accessed by clicking here.
Dating back to 2019, the plaintiff has paid the defendant $23 million for delinquent credit card portfolios. The defendant provided sample portfolios containing accounts that are emblematic of what will be included in the full portfolio, but most of the information identifying any particular consumers is masked or hidden. The plaintiff used the sample portfolios to determine the amount it wished to bid on purchasing the full portfolios from the defendant. The defendant represented that the accounts being sold to the plaintiff were “substantially similar” to the ones that were included in the sample portfolio.
The complaint accuses the defendant of cherry picking certain accounts and placing them with more preferred debt buyers while the plaintiff was not sold accounts that were substantially similar to what it saw in the sample files. The defendant, according to its policies, was entitled to retain a percentage of the accounts it was selling, likely as a means of testing the performance of the accounts it retained against the amount it received for selling the other accounts. But that selection was not part of the original agreement between the two sides and the accounts being retained were supposed to be selected at random, which the plaintiff says did not occur.
Conducting a statistical analysis, the plaintiff accused the defendant of not randomly removing the higher-valued accounts.
As a result of the defendant’s actions, “Absolute expects to lose somewhere between 10-25% of its $23 million investment – not even recovering its cost basis – rather than achieving a high multiple rate-of-return,” the plaintiff says in its complaint. “These losses are solely attributable to the degraded quality of the accounts Absolute purchased from Citi.”