Banking On Misery (2003)

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.