Settlement amount would be a record
By MortgageDaily.com staff
9/6/2002

Citigroup, Inc. may settle predatory lending allegations with the Federal Trade Commission. Such a settlement would be a record.

According to an article in the Wall Street Journal, the company is close to an agreement with the Federal Trade Commission (FTC) to pay about $200 million to settle allegations of predatory lending. While the discussions could still fall apart, such a consumer-protection settlement would be the largest with the FTC and the largest amount ever paid in a predatory-lending case, according to the Journal.

The allegations stem from Citigroup's 2000 purchase of Associates First Capital Corp., a Dallas-based finance company that has been integrated into CitiFinancial. The proposed FTC settlement would end a suit filed by the FTC in March 2001 against Associates for alleged deceptive marketing practices, the Journal said.

Citigroup is currently under investigation by New York authorities for its role in Enron's concealment of debt, inappropriate initial public offering allocations and conflicts of interest with its stock analysts.

In July, Mercantile Mortgage Company, Inc. of Westerville, Ohio settled predatory charges with the FTC for $250,000. In that case, Mercantile -- which is a wholesale lender -- was held liable for the predatory actions of one of its mortgage brokers.

In March, First Alliance Mortgage Company and its chief executive officer, Brian Chisick, settled a predatory lending case with the FTC for $20 million.

About a year ago, Citigroup agreed to pay as much as $20 million in refunds to around 9,000 borrowers to settle an investigation by the North Carolina attorney general. That case dealt with alleged deceptive practices at Associates.

While Citigroup's acquisition of Associates provided added net income, it has also led the banking behemoth to take steps to clean up the image inherited with the purchase. These steps included suspending a number of mortgage brokers and abandoning single premium life insurance sales.

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