Feb 6 Citigroup Inc has agreed to pay $110
million to thousands of homeowners who were forcibly charged
expensive property insurance premiums, a court filing showed, as
several U.S. banks and insurers were criticized by regulators
over such practices.
The class-action lawsuit filed in a New York federal court
involves "force-placed insurance," which is placed by a bank or
other mortgage lenders to protect their interests in a property
if the homeowner's insurance lapses.
The class members who were charged for force-placed hazard
insurance will receive back 12.5 percent of the premium upon
submitting a claim, as per an agreement between Citigroup and
The agreement, which needs to be approved by the court,
calls for Citi to stop accepting commissions for force-placed
insurance for a period of six years from the effective date of
Banks have been under increasing scrutiny from regulators
over force-placed insurance. Mortgage agreements give lenders
the right to force-place insurance, but regulators have accused
banks and insurance companies of pushing up policy prices with
improper commission and reinsurance agreements.
In September, JPMorgan Chase & Co and the nation's
largest force-placed insurer Assurant Inc agreed to a
$300 million settlement..
One of Citi's unit that deals with the insurance received a
15 percent commission on hazard insurance premiums during the
proposed settlement class period, according to the filing.
Citi has also agreed to refund 8 percent each of
force-placed flood insurance premiums and force-placed wind
insurance premiums, even though no commissions were paid to Citi
or its affiliates on flood or wind insurance.
The plaintiffs in total were charged about $758
million in hazard insurance premiums and $173 million in flood
insurance premiums, according to the filing.
The case is Gordon Casey, Duane Skinner and Celeste Coonan,
individually and on behalf of all others similarly situated vs
Citigroup Inc, Case No. 12-00820, U.S. District Court, Northern
District of New York.