Citigroup agrees to $215 million settlement

? Citigroup Inc. agreed to repay customers $215 million to settle federal charges that a company it acquired manipulated people into buying overpriced mortgages and credit insurance.

About 2 million consumers with mortgages or personal loans would receive cash refunds or reduced loan balances under the agreement, which would become the largest settlement in the Federal Trade Commission’s history, FTC Chairman Timothy Muris said Thursday.

Whom to contactConsumers with questions about the settlement can call the FTC at (877) 862-0886.

In mortgage cases, consumers would receive refunds averaging about $1,000, covering about 60 percent of their losses, Muris said. The smaller, personal loans will bring smaller refunds.

“These are positive steps in an industry that for too long has been plagued by deception and abuse,” Muris said. “We will be looking to ensure that the law is obeyed.”

The commission voted 5-0 Thursday for the agreement, which still needs approval from a federal court.

Consumers should expect to wait about 10 months for the checks, officials said.

By settling, Citigroup does not admit to breaking any law. The company said it began reforms after taking over Associates First Capital Corp.

“When we bought Associates, we found certain unacceptable practices that needed to be changed,” Citigroup president Robert Willumstad said. “We are confident that today’s settlement provides redress to those former Associates customers who were harmed.”

A federal court in Atlanta still must approve the settlement, the FTC said.

The agreement also will not become final until a related settlement in a class action lawsuit in California is approved, the FTC said. Approval of that settlement, which would provide another $25 million to consumers, could take several months, the agency said.

In 2000, Citigroup bought Associates First Capital Corp., which got consumers to consolidate their debts into a single loan with the promise of lower monthly interest payments, according to a lawsuit filed last year by the FTC. The loans, however, often came with substantial fees that made them even more expensive than the original debt.

When Associates was acquired by Citigroup, it was one of the nation’s largest lenders to high-risk borrowers, the FTC said. Like other similar lenders, Associates charged interest rates much higher than those available to lower-risk consumers.

The FTC charged that Associates made borrowers unknowingly purchase credit insurance products by automatically including them in monthly loan payments.