Citibank Class Action Says Mortgage Escrow Accounts Aren’t Paid Interest

A consumer recently filed a class action lawsuit alleging that Citibank mortgage escrow accounts are not paid interest in violation of California law based on a recent Circuit Court decision.

Plaintiff Robin Moody filed the class action against Citibank NA claiming that the lender does not pay interest on their Citibank mortgage escrow accounts.

Moody says this violates California Civil Code, an argument recently supported by a Ninth Circuit Court decision.

According to the Citibank class action lawsuit, Moody entered into a mortgage agreement in 2006 for her single family home in California. In 2016, Moody’s mortgage was transferred to Citibank.

The Citibank mortgage class action lawsuit says the lender has not paid interest on Moody’s escrow account despite her making timely deposits. Moody claims that this failure to pay interest is in violation of California state law.

“As required by the Moody Mortgage Agreement, Plaintiff Moody has timely deposited funds into the escrow accounts,” the Citibank mortgage class action lawsuit states. “But Moody has never received back from Defendant or its agents or loan servicers the interest owing on her funds maintained in the escrow accounts.”

Escrow accounts are typically held by mortgage lenders and payments are made into the account to pay for expenses including property taxes and home insurance fees. The payments to an escrow account are typically included in a monthly mortgage payment.

California Civil Code states that “every financial institution that makes loan upon the security of real property […] shall pay interest on the amount so held to the borrower.” The law also determines that interest must be paid at a minimum rate of two percent and that no fees may be imposed reducing the interest rate to below two percent.

Banks have historically argued against following these state laws, claiming that the National Bank Act preempts state statutes. In March 2018, the Ninth Circuit Court rejected this argument and ruled that the National Bank Act does not preempt state mortgage escrow laws.

Additionally, Moody’s Citibank mortgage agreement allegedly contains an acknowledgement of the lender’s obligation to pay interest under state laws.

The Citibank mortgage agreements reportedly states: “Unless an agreement is made in writing or Applicable Law requires interest to be paid on the Funds, Lender shall not be required to pay Borrower any interest or earnings on the funds.”

Moody argues that California state law qualifies as “applicable law” and that Citibank has therefore agreed to pay interest on her escrow account.

Moody seeks to represent a statewide Class of California consumers with a Citibank mortgage loan who paid money into an escrow account and did not receive interest on the account from the lender.

The Citibank mortgage class action lawsuit seeks restitution, disgorgement, damages, court costs, and attorneys’ fees.

The plaintiff is represented by Michael F. Ram and Susan S. Brown of Robins Kaplan LLP; and Samuel J. Strauss of Turke & Strauss LLP.

The Citibank Mortgage Class Action Lawsuit is Moody v. Citibank NA, Case No. 4:18-cv-04496-KAW, in the U.S. District Court for the Northern District of California.