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Citigroup and Credit Subsidiary Fined $70 Million by Fed for ECOA, HOEPA Violations

WASHINGTON - The Federal Reserve on May 28 issued a consent Order to Cease and Desist and an Order of Assessment of Civil Money Penalty against Citigroup Inc. and its credit subsidiary CitiFinancial Credit Co. and ordered the largest financial institution in the U.S. to pay a penalty of $70...

By Staff Writer | Updated on June 08, 2004

WASHINGTON – The Federal Reserve on May 28 issued a consent Order to Cease and Desist and an Order of Assessment of Civil Money Penalty against Citigroup Inc. and its credit subsidiary CitiFinancial Credit Co. and ordered the largest financial institution in the U.S. to pay a penalty of $70 million for violating provisions of the Equal Credit Opportunity Agency and Home Ownership and Equity Protection Act of 1994 regarding practices related to borrowers taking out riskier, higher-interest “subprime” personal and home mortgage loans. The Fed alleged Baltimore-based CitiFinancial violated federal regulations when it improperly required the signature of a co-applicant on some loans when the creditworthiness of the person taking out the loan was already sufficient. The Federal Reserve charged those violations came “in connection with attempts to increase joint insurance sales through an increased volume of co-applicant loans.” The Fed said CitiFinancial also allegedly misled regulatory examiners who interviewed company employees. While allegedly not admitting to any wrongdoing, Citigroup and CitiFinancial Credit consented to the issuance of the Fed’s order and agreed to take steps to ensure compliance with federal lending regulations and to enhance compliance with consumer protection laws. The Fed said restitution will be made available to borrowers who purchased joint credit insurance in connection with a co-applicant loan from CitiFinancial or any one of its U.S. retail branches from Jan. 1, 2001 – Dec. 31, 2002. Restitution will also be made available to certain borrowers whose personal loans from CitiFinancial or its subsidiaries were refinanced by CitiFinancial to an “EquityPlus” loan. The Fed said the $70 million penalty could be reduced by up to $20 million depending on the amount of restitution actually made to some subprime personal and home mortgage borrowers. -

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