Citigroup Inc. has agreed to pay the money to thousands of homeowners who had been overcharged.
According to recent news, Citigroup Inc. has now agreed to a payout of $110 million to thousands of homeowners who had force placed insurance applied to them when the allowed their own coverage to lapse or they stopped making payments.
The forcibly charged property coverage came with highly expensive premiums, said a court filing.
This trend of force placed insurance lawsuits has been spreading across the United States, as many American insurers and banks have found themselves receiving criticism from regulators regarding their practices. Many of the lawsuits have already reached settlements and insurers have found themselves paying millions upon millions of dollars back to the policyholders who had been charged expensive premiums.
This particular force placed insurance class action lawsuit was filed in a New York federal court.
The members of the class action suit who had been charged the high premiums for this coverage will be receiving 12.5 percent of the amount they paid upon submitting a claim for it. This was the agreement that was reached between the plaintiffs and Citigroup. This arrangement, which must still receive the court’s approval, will also require that Citigroup cease its practice of receiving commissions for this type of coverage, for a period of a full six months, beginning on the settlement date.
Although mortgage lenders have every right to apply this coverage on behalf of borrowers who have breached their mortgage contract by allowing their homeowners policies to lapse or to go unpaid, regulators have pointed out that the policy prices charged to these customers have been driven upwards as a part of the standard procedures of the banks and insurers.
They also stated that the reinsurance agreements and the commissions have been inappropriate. One of the units that deals with this coverage at Citi was said to have been receiving a commission of 15 percent during the period of time under scrutiny by the lawsuit.
Several force placed insurance lawsuits have been occurring recently, such as the news in September, when the largest insurer of this nature, Assurant Inc, along with JPMorgan Chase & Co. agreed to a settlement of $300 million.