April 20, 2001
Citigroup's annual meeting provided a platform this week for angry shareholders, who denounced the company's recent purchase of Associates First Capital, despised by consumer advocates for its lending practices.
"No company that values its good name would have bought Associates," said Martin Eakes, president of Self-Help, a North Carolina nonprofit community development lender.
Eakes said he had found one borrower whose loan from Associates included $15,000 in front-loaded fees. He noted that the Federal Trade Commission recently filed the largest lawsuit in its history against Associates and Citigroup, saying that Associates has systematically engaged in abusive lending practices that have cost low-income consumers millions of dollars in fees and excessive interest charges.
Eakes also lambasted Citigroup for some of its practices -- including selling single-premium credit insurance on home loans, policies in which all the fees are paid upfront. The practice is generally regarded as abusive and has been denounced by such agencies as the Treasury Department, Fannie Mae, Freddie Mac and the Department of Housing and Urban Development, Eakes said.
Citigroup chief executive Sanford Weill responded that Citigroup was working to upgrade the lending practices of Associates. Eakes said he was doubtful the company would change its ways. His remarks drew loud applause from other shareholders at the meeting, held in Carnegie Hall.
Eakes and other consumer advocates aren't the only observers expressing doubts about the Associates acquisition. Newsday quoted industry analysts as saying the purchase is proving troublesome, as shown in Citigroup's first-quarter results, showing profits off 7 percent.
