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Citigroup settlement Original Source Link: (May no longer be active)
http://story.news.yahoo.com/news?tmpl=story&u=/dowjones/20020906/bs_dowjones/200209060053000033http://story.news.yahoo.com/news?tmpl=story&u=/dowjones/20020906/bs_dowjones/200209060053000033
Business - Dow Jones Business News
Citigroup Confirms Settlement Discussions With FTC on Alleged Predatory Lending
Fri Sep 6,12:53 AM ET
NEW YORK -- Citigroup Inc. (NYSE: C - News) Chief Financial Officer Todd Thomson Friday confirmed that the company is in advanced discussions with the Federal Trade Commission to settle allegations of predatory lending to consumers.
The New York financial-services giant is reportedly going to pay about $200 million to settle the charges, which would make it the largest consumer- protection settlement with the FTC and the largest amount ever paid in a predatory-lending case, according to The Wall Street Journal.
FTC spokesman Derrick Rill also confirmed the agency is near a settlement with Citigroup, but declined to elaborate.
Predatory lending is an ill-defined term, but it is generally viewed as mortgage lending that unfairly takes advantage of consumers, especially those with poor credit histories, through abusive practices such as deceptive marketing or unnecessary refinancings to generate fees.
The proposed FTC settlement would end a suit filed by the commission in federal court in Atlanta in March 2001 against Associates First Capital Corp., a Dallas-based subprime lender that Citigroup acquired in November 2000 for $27 billion. Citigroup and its own consumer-finance unit, CitiFinancial, into which Associates was merged, also are defendants.
"When we acquired Associates they had some problems with the FTC, with [the oft-criticized] single-premium insurance and other things described as improper, " said Citigroup Chief Executive Sandy Weill, speaking at Merrill Lynch's Banking & Financial Services Investor Conference, which was aired over the Internet.
However, "these problems were related to a company before we acquired it," Mr. Weill said, adding, "CitiFinancial and Citigroup have been leaders in changing the practices."
The so-called predatory lending tactics Associates allegedly used included: deceptive marketing practices that induced clients to consolidate their home loans with high interest rates, cost and fees; inducing borrowers to unknowingly purchase optional insurance on loans; and abusive debt-collecting practices.
William Brennan, an attorney with Atlanta Legal Aid Society who has filed several lawsuits against Associates, applauded the report of a proposed settlement. He said the FTC had offered a $100 million settlement before it filed its lawsuit, but the offer was rejected.
"This is just wonderful news that they are contemplating the largest settlement in the history of predatory mortgage lending," Mr. Brennan added.
After Citigroup acquired Associates, it began settling predatory lending cases around the country. Mr. Brennan said he has settled about 10 cases since the Citigroup acquisition; terms are confidential.
Citigroup isn't the only company facing allegations of predatory lending. Household International Inc. (NYSE: HI - News) , which also serves the subprime market, has also been the focus of lawsuits for such practices.
-- Tara Siegel Bernard of Dow Jones Newswires and Paul Beckett, staff reporter of The Wall Street Journal, contributed to this article.
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