Banking on Misery (2003)
*Note: Further content will be added online shortly. Most stories are currently in print version only.
Citigroup, Wall Street, and the Fleecing of the South
Vol. 31, No. 2 Summer 2003
Excerpt from the feature story:
Over the past year, Citigroup and its CEO, Sanford I. Weill, have been buffeted by investigations into the company's misadventures with Enron, WorldCom, and other ill-fated Wall Street players.
But is there an overlooked scandal brewing for Citi in places far from Wall Street? In Southern hometowns such as Selma, Ala., Ashland, Ky., and Knoxville, Tenn., people complain Citigroup has taken advantage of them in an unglamorous part of its financial empire—personal loans and mortgages aimed at borrowers with bad credit, bills piling up or, in many instances, simply a trusting nature. Unhappy customers claim the company manipulated them into paying excessive rates and hidden fees, refinancing at unfavorable terms, signing deals that trapped them into bankruptcy and foreclosure.
These borrowers are part of the growing "subprime" market for financial services. They are mostly low-income, blue-collar and minority consumers snubbed by banks and credit card companies. Still others are middle-class consumers who have hit hard times because of layoffs or credit card-fueled overspending. Whatever their circumstances, they pay dearly. Citi's subprime customers frequently pay double or triple the prices paid by borrowers with Citi credit cards and market-rate mortgages—annual percentage rates (APRs) generally between 19.0 and 40.0 on personal loans and 8.5 and 21.9 on mortgages. And beyond exorbitant APRs, critics and lawsuits claim, Citi has fleeced customers with slippery salesmanship and falsified paperwork.
A seven-month investigation by Southern Exposure has uncovered a pattern of predatory practices within Citi's subprime units. Southern Exposure interviewed more than 150 people—borrowers, attorneys, activists, current and ex-employees— and reviewed thousands of pages of loan contracts, lawsuits, testimony, and company reports. The people and the documents provide strong evidence that Citi's subprime operations are reaping billions in ill-gotten gains by targeting the consumers who can least afford it.
Excerpt from "Perpetual Debt, Predatory Plastic":
Last year John, a 55-year-old African American living on public assistance in Takoma Park, Maryland, a Washington, DC, suburb, received an invitation in the mail promising him a chnce to join millions of other Americans who enjoy the convenience and status of credit-card membership. In its direct mail solicitation, United Credit National Bank Visa declared, "ACE VISA GUARANTEED ISSUE or we'll send you $100.00! (See inside for details.)" For the unsuspecting, it might have sounded like a terrific opportunity to enter the credit mainstream. But a closer look inside showed that the primary beneficiary was the credit card company.
Front Porch: Letter from the Editor
Stop the Profiteers by Chris Kromm
The New Loan Sharks by Michael Hudson
PART I. BANKING ON MISERY
Citigroup, Wall Street, and the Fleecing of the South by Michael Hudson
Millions of Southerners have been ensnared by "subprime" lenders who target consumers made vulnerable by discrimination and financial need. Citigroup subsidiaries have led the way in demonstrating how easy it is to make money off people desperate for cash.
Trace the rise to power of Sanford Weill, Citigroup's CEO, as he carved out a subprime lending empire.
WEB EXCLUSIVE - MAPPING MISERY:
How CitiFinancial's subprime lending units target minority and low-income areas in your city:
WEB EXCLUSIVE - "WE NEEDED MONEY, AND THEY KNEW WE NEEDED MONEY"
Read profiles of borrowers from around the country victimized by the manipulative practices of CitiFinancial and its predecessor, Commercial Credit.
Plus sidebars from the print edition:
* Who's targeted: Numbers tell the story
* Reinventing redlining: Citi's prime lenders set bad marks for serving poor, minorities
* Unsettled issue: Lawsuit alleges harassment continued even after settlement, Citigroup purchase
* Citi and credit insurance: Profits and price
* Household name: Citi's chief rival has a rocky history, too
* Spirit and letter: Ex-employee said Citi takeover increased rather than solved problems
* Reforming foreclosures: How well did Citi keep its promise?
* Collecting trouble: Lawsuits claim harassment of borrowers
* Upfront costs: "Single-premium" insurance disavowal only goes so far
* Citi's reforms: Real or imagined?
* Access denied: Citi's arbitration clauses head off threat of jury verdicts
* Special child: For mentally retarded borrower, arbitration a losing proposition
* Citi responds
PART II. THE POVERTY INDUSTRY
(all pieces print edition only)
Perpetual Debt, Predatory Plastic by Robert D. Manning
From the company store to the world of late fees and overlimit penalties: credit cards go predatory.
From Pawnshops to "Financial Supermarkets" by Mary Kane
Fringe banking gains a foothold in the mainstream.
Simple Courtesy by Taylor Loyal
Banks have discovered overdraft fees to be fertile ground for innovations in profit-making.
PART III. FIGHTING BACK
Journey for Justice by Michael Hudson
Citigroup shareholders confront an unfamiliar sight: the orange t-shirts of a borrowers' group determined to get fair treatment.
Battling the Odds by Bill Barrow
Consumer advocates fight for a voice in Alabama's legislature.
"You Can't Pass It On If It Belongs to Someone Else" by Kenneth A. Harris
A South Carolina woman speaks out against the people who took her home.
Predatory Lending and the Law by Keith Ernst
The dos and don'ts of legislative reform.
Seven Signs of Predatory Lending
How to know you're being cheated.
For the fight against predatory lending.
- The South at War
- 16 Armed for Armageddon
- By Becci Robbins Under cover of the war on terror, the Bush Administration plans to turn South Carolina into the production site for a new generation of nuclear weapons—and a new arms race.
- 16 Armed for Armageddon
- Cover Section
- 20 Introduction: The New Loan Sharks
- By Michael Hudson
- 22 Part I. Banking on Misery: Citigroup, Wall Street, and the Fleecing of the South
- By Michael Hudson Millions of Southerners have been ensnared by "subprime" lenders who target consumers made vulnerable by discrimination and financial need. Citigroup subsidiaries have led the way in demonstrating how easy it is to make money off people desperate for cash.
- 48 Part II. The Poverty Industry Perpetual Debt, Predatory Plastic
- By Robert D. Manning From the company store to the world of late fees and overlimit penalties: credit cards go predatory.
- 54 From Pawnshops to "Financial Supermarkets"
- By Mary Kane Fringe banking gains a foothold in the mainstream.
- 60 Simple Courtesy
- By Taylor Loyal Banks have discovered overdraft fees to be fertile ground for innovations in profit-making.
- 62 Part III. Fighting Back Journey for Justice
- By Michael Hudson Citigroup shareholders confront an unfamiliar sight: the orange t-shirts of a borrowers' group determined to get fair treatment.
- 65 Battling the Odds
- By Bill Barrow Consumer advocates fight for a voice in Alabama's legislature.
- 68 You Can't Pass it on if it Belongs to Someone Else
- By Kenneth A. Harris A South Carolina woman speaks out against the people who took her family's home.
- 69 Predatory Lending and the Law
- By Keith Ernst How predatory lending can be attacked through legislative reform.
- 70 Seven Signs of Predatory Lending
- How to know you're being cheated.
- 72 Resources for the Fight Against Predatory Lending
- 20 Introduction: The New Loan Sharks
- 4 Front Porch: Letter from the Editor
- 6 Southern News Roundup
- 74 Book Review: Subversive Southerner
Since 1973 Southern Exposure has gained critical praise for its thorough investigations, unsentimental portraits of Southern life, and public interest reporting. Click here to subscribe.