Sometimes, when a homeowner’s insurance lapses, the bank imposes what is called a lender placed insurance policy. In fact, many who have been the recipients of Citibank lender placed insurance believe it is unacceptable and unfair.

When a borrower fails to maintain an insurance policy or lets it lapse, banks like Citibank may be placing insurance policies of their choice on unsuspecting homeowner.

Citibank lender placed insurance policies, as well as the policies of other banks, are imposed on borrowers allegedly to force the homeowner to buy policies with higher premiums.

Sometimes, these banks also receive fees, commissions, kickbacks and other types of financial compensation when they impose these policies on their borrowers.

Policies like the Citibank lender placed insurance are usually placed on borrowers without their knowledge. This practices is not illegal, but often provides unnecessary coverage. These policies are often backdated to collect old premiums, even when the homeowner had no risk of loss.

At times, banks enter into agreements with insurance providers to share premiums on these force placed insurance policies and may receive other financial benefits at the expense of the borrower.

Citibank Lender Placed Insurance Policies

Citibank, specifically, has found itself in hot water in the past regarding their lender placed insurance practices.

In 2014, Citibank agreed to settle class action lawsuits that claimed Citibank lender placed insurance policies violated the rights of homeowners by forcing them to buy polices that were excessive and unnecessary.

One of these Citibank lender placed insurance lawsuits claimed that the bank forced those who lived in flood zones to carry excessive flood coverage policies and that the bank financially profited from these policies. The lawsuit claimed the profit was received in an improper manner.

Another Citibank lender placed insurance class action lawsuit claimed that Citi (collectively Citibank NA and CitiMortgage Inc.) violated borrowers’ rights by wrongly profiting from force-placed hazard insurance through Assurant Inc., American Security Insurance Company and Standard Guaranty Insurance Company. Allegedly they paid unlawful commissions to Citi.

Together, these Citibank lender placed insurance class action lawsuits were settled for $110 million.

Settlement class members who were charged for force-placed hazard insurance will be paid 12.5% of the insurance premiums they paid. Citi allegedly received a 15% commission on these premiums so the 12.5% covers about 83% of the alleged kickbacks.

Citi also agreed to pay back 8% of the Citibank lender placed insurance premiums for wind insurance for those who were forced to purchase this coverage.

If you believe you were forced to pay for an over-priced, unnecessary or otherwise excessive Citibank lender placed insurance policy, you may be able to file a claim to recover monetary damages or you may be eligible to join a class action lawsuit investigation and seek compensation for the improper charges you paid.