Collecting Trouble: Lawsuits Claim Harassment of Borrowers

Dorothy Polis and her fiancé, Marshall Jarrell, needed money to pay bills and put a porch on their home in Ashland, Ky. They crossed the Ohio River into Huntington, WVa., and signed a stack of mortgage papers with a loan broker called American Liberty Financial. They didn’t realize, their lawyer would say later, that the deal had raised their annual percentage rate from 8.9 to 13.4 and socked them with hidden charges and an abusive broker’s fee.

Their debt was transferred to Associates First Capital Corp. and then to CitiFinancial Mortgage—a standard practice in the subprime industry, where brokers and small lenders frequently originate loans and then sell them to larger companies.

In February 2002, the couple moved to cancel the loan, alleging violations of federal credit laws. They instructed CitiFinancial to contact their attorney. Nevertheless, the couple maintains, CitiFinancial launched a series of harassing calls.

Things came to head in May 2002. Polis, a disabled mother of two, says a collector told her she was “stupid” and she was going to end up “out on the streets” if she listened “to a slick-talking lawyer.” Jarrell, a utility contractor, says the collector called him and asked: “How many children do you have? Where are you going to keep them?” The next day, the collector left an answering machine message that said: “I spoke with your lawyer regarding the account. He is a public interest lawyer and is not representing you.”

Their attorney, Bren Pomponio of the non-profit legal center, Mountain State Justice, says the collector called him, too—but only to warn him “you are getting these folks in a lot of trouble” by trying to use their case to “graduate to the big leagues” of the law.

The couple sued in federal court, alleging fraud and collection harassment. Citi said the couple had failed to show violations or injury. Because the calls were legitimate efforts to collect a debt, Citi’s attorneys added, the company could not be responsible for any alleged harassment.

The judge rejected those arguments. In March, Pomponio says, Citi agreed to a settlement totaling nearly $40,000.

For critics of the company, the experiences of consumers such as Polis and Jarrell raise questions about Citi’s commitment to cleaning up problems with loans it acquired when it purchased Associates in November 2000.

Determining how well CitiFinancial currently treats customers at the loan-making level is difficult, Pomponio says, because there’s a lag time before victims of predatory lending realize they’ve been taken and seek help. In contrast, “debt collection is something that you can see right now,” he says. “If they’re changing their ways, you can see from their debt collections.” But in fact, he says, the company has shown “equal or increased vigor” in dying to collect from victims of Associates’ abuses. His assessment is supported by other customers who say they’ve had uneasy encounters with Citi’s collectors:

■ In Huntington, Pomponio is pressing the case of a 64-year-old widow who alleges she, too, was badgered by CitiFinancial. The lawsuit claims Sue Cary Smith was the victim of a series of 10 predatory loans with Associates over less than six years. Rather than take action to make amends for Associates’ abuses, Pomponio says, Citi turned up the heat on Smith, calling her an average of more than five times a day. According to the lawsuit, CitiFinancial collectors called her at least 711 times between Nov. 8, 2001 and March 12, 2002, as recorded by her answering machine and caller ID. Attorneys for CitiFinancial could not be reached for comment on the case.

■ In Jacksonville, Fla., a 72-year-old homeowner filed a suit in March claiming that after CitiFinancial took over her loan from Associates, it began sending her incorrect and conflicting statements. The lawsuit alleges Citi collectors called Emily Sampson “at all times of the day and night.” Her attorney, Lynn Drysdale, says the incessant barrage of abuse began in mid-2001 after the loan was transferred from Associates to CitiFinancial and continued into early 2003.

Drysdale says Sampson was current on her payments, but the calls and Citi s muddled accounting caused damage to Sampson’s health; Sampson worried she was going to lose her home. “She just keeps paying because she’s scared to death,” Drysdale says.

Drysdale says Sampson’s case and at least three others she’s handled indicate CitiFinancial’s records on Associates loans are in disarray. In Sampson’s case, she says, Citi lists three different account numbers for the same loan. Drysdale says the company refuses to provide basic information to borrowers or their attorneys that might help clean up the problems.

“It’s more of the same garbage,” she says. “Basically what you’ve done is taken an Associates loan and made it worse—put it in the hands of someone who’s going to compound the problem.”

David Tong, an attorney for CitiFinancial, has asked that Sampson’s suit be dismissed, arguing it fails to give specifics of the alleged harassment. “It’s not very clear from the complaint” what Citi is supposed to have done wrong, Tong says.

He adds that Citi never received the letters from Drysdale requesting information about Sampson’s account, apparently because the letters had incorrect addresses on them. “CitiFinancial will comply with any written request they receive,” Tong says. “Because they’re required to under federal law and they want their customers to be able to get this information.”

■ In Decatur, Ga., CitiFinancial customer Jackie Wash claims a Citi manager called and told her 13-year-old son that “he was coming to take our house and that I needed to come give them some money.”

Wash says she fell behind on her loan in 2002 because she hit a financial snag after starting her own business. Citi allowed her to defer one month’s payment, but she says it also tried to intimidate her into paying money she didn’t have. “I told them: I’m trying to work with you, but I’m not going to let you violate my rights. You’ve got the wrong person if you think you’re going to do that.” Her attorney, Gary Leshaw, maintains Citi also “totally screwed up” how much she owed on the loan, claiming $12,462 when it should have been well under $10,000. “They made an effort to publicize they’ve cleaned up their act,” Leshaw says. “But I don’t buy it.”