U.S. Trustee Program Reaches $5 Million Settlement with Citibank to Protect Debtors in Bankruptcy

The Department of Justice’s U.S. Trustee Program (USTP) has entered into a national settlement agreement with Citibank N.A. (Citibank), Department Stores National Bank (DSNB) (collectively Citi), and FDS Bank requiring Citi to pay $5 million to remediate robo-signed proofs of claim filed in consumer bankruptcy cases in connection with more than 71,000 Macy’s-branded credit card accounts, Director Cliff White of the Executive Office for U.S. Trustees announced today.

The proposed settlement has been filed in the U.S. Bankruptcy Court for the Northern District of Georgia, where it is subject to court approval.  In the settlement, Citi acknowledges that its affiliate DSNB issued Macy’s-branded consumer credit card accounts.  FDS Bank was responsible for account servicing activities and contracted certain bankruptcy-related services to vendors.  Between 2012 and 2015, tens of thousands of proofs of claim were filed in bankruptcy cases across the country on DSNB’s behalf.  These proofs of claim were improperly signed, under the penalty of perjury, by employees of a third-party vendor who had not reviewed and/or lacked knowledge of the contents of the proof of claim.  In some cases, the electronic credentials of the vendor’s employees were used to file claims where the employee did not review the claim.  These improper practices were identified when Citibank took over the servicing of the accounts in late 2015 from the third parties.  Citi self-reported the errors to the USTP. 

“I am pleased that Citi has acted responsibly by self-reporting these deficient bankruptcy practices and agreeing to remediate affected borrowers to address the errors,” said USTP Director White.  “I am also encouraged that Citi has instituted internal bankruptcy procedures to ensure that the vendor’s errors should not be repeated.  When creditors fail to comply with the bankruptcy laws and rules, they must be held accountable.  The U.S. Trustee Program remains diligent in its effort to ensure that creditors as well as debtors who disregard the law will be held accountable for their actions.”

Settlement Terms

Citi agrees to pay $5 million to remediate DSNB account holders in whose bankruptcy cases improperly signed proofs of claim may have been filed.  Using the former vendor’s data, Citi has undertaken a review and identified more than 71,000 eligible accounts.  Each eligible account will receive a pro rata share of the $5 million dollar payment.  Citi will also send a notice to eligible accounts informing the account holder of the reason for the payment.

Citi’s independent internal compliance group will perform an audit to ensure that Citi has met its obligations under the settlement.  Citi will then file a report with the Court certifying that it has completed its corrective action obligations under the settlement. 

While the settlement resolves any actions that could be brought by the USTP for the covered conduct, it does not impact the rights of borrowers or other third parties, including trustees.

The U.S. Trustee Program is the component of the Justice Department that protects the integrity of the bankruptcy system by overseeing case administration and litigating to enforce the bankruptcy laws. The Program has 21 regions and 92 field office locations. Learn more information on the Program at: https://www.justice.gov/ust.