CitiFinancial agrees to $70 million fine

May 28, 2004

Penalty stems partly from mortgage lending

Inman News

Citigroup and CitiFinancial Credit Co., a non-bank subsidiary of Citgroup, have agreed to pay a $70 million civil fine as outlined in a cease and desist order issued by the Federal Reserve Board.

The order, announced today, assesses a civil penalty against CitiFinancial and requires the company to pay restitution to certain subprime personal and home mortgage borrowers. Of the $70 million penalty, up to $20 million may be used to make restitution payments to borrowers.

Citigroup and CitiFinancial consented to the order without admitting any allegations. The allegations are in connection with CitiFinancial's lending activities and its conduct during an examination by the Federal Reserve Bank of New York.

The Reserve Bank has alleged CitiFinancial failed to comply with rules that prohibit a creditor from requiring the signature of a spouse or other person if an applicant qualifies based on his or her own creditworthiness. Additionally, the Reserve Bank alleges CitiFinancial engaged in unsafe and unsound underwriting and lending practices with respect to certain loans subject to the Home Ownership and Equity Protection Act. According to the Reserve Bank, CitiFinancial also allegedly misled examiners in connection with interviews of CitiFinancial employees.

The order requires Citigroup and CitiFinancial to take steps to maintain and enhance compliance with consumer protection laws. Harry Goff, president and CEO of CitiFinancial, said the company has already addressed the three areas of concern through steps such as employee training and updated policies.

"As the leading consumer finance company in North America, CitiFinancial plays a leadership role as a community lender, providing access to credit to those not historically well served in the traditional consumer marketplace," Goff said. "Over the past three years, CitiFinancial has led the way in implementing best practices that better serve our customers' needs and meet the highest consumer protection standards. Significant changes have been made to personnel, policies, procedures and controls."

Copyright: Inman News Features

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