Citigroup settles U.S. robo-signing case tied to consumer bankruptcies

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NEW YORK (Reuters) - Citigroup Inc C.N will pay $5 million to address "robo-signed" proofs of claim filed in consumer bankruptcy cases involving 71,448 Macy's-branded credit card accounts, the U.S. Department of Justice announced on Monday.

The proofs of claim were filed between 2012 and 2015 by employees of a third-party vendor who did not review their contents, and had been working on behalf of Citigroup affiliate Department Stores National Bank, which issued the accounts.

According to a filing with the U.S. bankruptcy court in Gainesville, Georgia, Citigroup learned of problems with the vendor’s practices after it began servicing the accounts in July 2015, and notified the government the following month.

Citigroup has complied with applicable bankruptcy signing requirements since it began filing proofs of claim on DNSB’s behalf, and has adopted procedures to avoid a recurrence, the filing said.

The $5 million payment will be distributed pro rata, with affected cardholders receiving refunds of about $70 each.

Citigroup, based in New York, said in a statement it was pleased to resolve the matter, and regretted any inconvenience to customers.

Macy's Inc M.N was not accused of wrongdoing.

Creditors file proofs of claim in bankruptcy cases to set forth how much they believe they should recover and why.

Robo-signing involves the systematic approval of documents that have not been read. The practice was a cause of the U.S. housing crisis last decade, enabling marginal borrowers to obtain loans they did not qualify for.

Reporting by Jonathan Stempel in New York; Editing by Lisa Shumaker