Citigroup Inc. announced last week that it has settled a lawsuit brought by some of its borrowers over the suspension or reduction of home equity lines of credit (HELOCs).
Plaintiffs filed the suit in January 2009, claiming that in 2008 Citigroup had begun to suspend or reduce HELOCs for some of its borrowers. The suit says the financial institution was pursuing a "thinly-veiled, unlawful attempt to limit its exposure to the risk of collapse in the United States housing market and to rid itself of below-market interest rate loans."
According to the settlement, Citigroup will offer borrowers affected by the suspensions and reductions of HELOCs a chance to reinstate their home equity accounts. Some of them may also receive a cash payment of $120 if they closed a HELOC after receiving a suspension or reduction notice and incurred an early closure fee.
The settlement will cover borrowers whose HELOCs were reduced or suspended between Jan. 1, 2008, and Jan. 31, 2012.
Citigroup, which appointed a new GC earlier this year, didn’t admit any wrongdoing in entering the agreement, and said in a statement it is pleased the matter is resolved.
A preliminary-approval hearing is scheduled for later this month.
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