Citigroup Vows to Improve Lending Practices

Citigroup Inc. has pledged to improve its consumer lending practices, following allegations of predatory lending tactics at the No. 1 U.S. financial services company and its planned merger partner Associates First Capital Corp. Among other steps, New York-based Citigroup said it will set up a special review process for foreclosures so borrowers do not wrongly lose their homes, and expand opportunities for low and middle-income people to obtain cheaper loans. Citigroup told U.S. regulators in a letter it will beef up compliance and controls in its consumer lending arm, improve employee training and add new prepayment penalty policies. The move comes as Citigroup plans to buy Associates, the country’s largest publicly traded consumer finance company, for $31.1 billion. Associates and Citigroup have come under heavy fire from consumer advocates for allegedly biased and predatory lending practices. Citigroup’s stock closed off 13 cents at $54.75, while Associates’ closed off 19 cents at $39, both on the NYSE. Associates’ marks Citigroup’s largest planned acquisition since the financial services company was formed two years ago from the merger of Citicorp and Travelers Group. Citigroup plans to buy Associates to build up its consumer lending arm.