Citigroup unit to pay nearly $1m for seizing US soldiers' cars

A Citigroup unit will pay $907,000 to settle allegations it illegally repossessed cars from US military servicemembers, the latest case of violations against soldiers, the Justice Department announced Monday.

CitiFinancial seized 164 cars between 2007 and 2010 despite knowing the borrowers were serving in the military, or had received orders to report for duty, and were protected under the law, the department said in a statement.

"This settlement provides financial relief and credit repair assistance to the servicemembers whose vehicles were repossessed by CitiFinancial," Associate Attorney General Rachel Brand said.

Filed in a Texas federal court, the settlement follows a separate $10.5 million agreement in 2015 with Santander Consumer USA, part of Spain's Santander Group, which purchased CitiFinancial's auto loans in 2010.

CitiFinancial will pay $5,000 to affected servicemembers and $500 per account to compensate borrowers for lost equity.

The Servicemembers Civil Relief Act provides protections for military members, empowering courts to block repossessions, require the refunding of some loan payments or appoint attorneys represent borrowers serving in the military.

The repossessions at issue in the latest settlement happened without the required court orders, according to the Justice Department.

As part of the Santander investigation, federal authorities learned CitiFinancial had sold Santander the right to collect debts from servicemembers after their cars had been repossessed.

In January, the Consumer Financial Protection Bureau forced CitiFinancial to refund $4.4 million to consumers and pay a fine of an equal amount, finding the bank had failed to tell borrowers about options that would have helped them avoid foreclosure on their homes.