Ex-Citigroup worker alleges illegal lending norms
15 June 2001
Reuters
By F. Brinley Bruton

A Citigroup Inc. unit deliberately targeted low-income, uneducated borrowers for loans and insurance they did not need or understand, a former employee alleged in a government lawsuit. The financial services giant has consistently denied such practices.

The charges, filed in an affidavit by part-time branch assistant manager Gail Kubiniec of Citigroup unit CitiFinancial, are part of the lawsuit filed by the Federal Trade Commission (FTC) against Associates First Capital Corp., a consumer lending unit that is part of CitiFinancial. The suit alleges predatory lending and deceptive marketing.

"I and other employees would often determine how much insurance could be sold to a borrower based on the borrower's occupation, race, age, and education level," Kubiniec said in the affidavit, a copy of which was provided to Reuters by a New York-based consumer advocacy group.

"If someone appeared uneducated, inarticulate, was a minority, or was particularity young or old, I would try to include all the coverages CitiFinancial offered," she said in reference to insurance and other products often tied to real estate or personal loans.

Citigroup has not admitted to predatory lending, but said in March it had dealt with the FTC's concerns by putting into place a program that addresses lending practices at Associates First, which Citigroup bought last year.

CITIGROUP DENIES ALLEGED ABUSES

Citigroup on Thursday denied alleged abuses at CitiFinancial, a longtime Travelers Group unit known as Commercial Credit until 1999. The unit changed its name shortly after financial services group Travelers merged with global bank Citicorp to form Citigroup.

The company said the allegations are against Citigroup policy.

"Ms. Kubiniec's allegations are an affront to the tens of thousands of CitiFinancial employees who strive every day to act in their customers' best interest," Citigroup spokeswoman Leah Johnson said. "If true, the unethical sales tactics she describes would constitute serious violations of the company's policies and standards."

Kubiniec's affidavit was filed on May 16 in a case brought by the FTC against Associates First in federal court in Atlanta. The FTC has charged Associates First with systematic and widespread abusive loan practices, often described as predatory lending. They include deceptive marketing to induce consumers to refinance existing debts into home loans with high interest rates, costs and fees.

The suit, which also names Citigroup and CitiFinancial as successors to Associates First, seeks redress for all borrowers who were harmed as a result of the alleged practices.

Federal Trade Commission officials could not immediately be reached.

Citigroup merged Associates First into CitiFinancial in March, but Kubiniec's affidavit covers practices at CitiFinancial before the two units were combined.

"As soon as we learned of her allegations, we commenced a thorough review that has reassured us that these alleged practices are in no way characteristic of how CitiFinancial employees treat their customers and sell products," Citigroup's Johnson said.

Last year, Citigroup said it would take steps to improve the consumer lending practices at Associates First.

HARASSMENT ALLEGED

The affidavit was provided to Reuters by Inner City Press/Community on the Move and Inner City Public Interest Law Center, which is campaigning against Citigroup over its takeover plans and lending practices.

Kubiniec, who could not be reached for comment on the affidavit, alleges that she saw CitiFinancial employees "harass and intimidate borrowers" who were behind with payments. "Managers condoned whatever tactics an employee used, as long as he obtained payment," she said.

"Typically, employees would only state the total monthly payment amount in selling a proposed loan. Additional information, such as the interest rate, and the financed points and fees, closing costs, and 'add-ons' like credit insurance, were only disclosed when demanded by the borrower," she said. "It was also common practice to try to sell borrowers the largest possible loan."

Kubiniec worked for CitiFinancial and its predecessor from 1995 until February in Lansing, Michigan and the New York towns of Tonawanda and Depew.