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Korea Accuses Citibank of Predatory Lending

KorAm bank accused of charging excessive rates on ARMs

July 21, 2005

By MortgageDaily.com staff

The subsidiary of an American banking giant has been accused of predatory lending. But what is unusual about these accusations is that the borrowers are not Americans.

Korea's Financial Supervisory Service is investigating allegations that Citibank Korea has cheated mortgage customers out of millions of dollars, according to AFX News Limited. The government has reportedly told the company to submit documents for the criminal investigation.

The Citigroup subsidiary says it was "the first foreign bank to establish a presence in Korea in 1967 and formed Citibank Korea on November 1, 2004, with an acquisition of KorAm Bank."

KorAm Bank's union reportedly filed a complaint with local prosecutors asking for a criminal investigation, accusing KorAm of skimming roughly $7 million since 2001 by charging ARM customers fixed rates.

The Asian unit says it was ranked as the top bank in a survey by the National Customer Satisfaction Index, Banking Service Sector. That survey was conducted on customers 20 and older with accounts one or more years old, KorAm said.

Citibank Korea has rejected the allegations made by the union, which has dogged the company with disputes "against a backdrop of increasingly vocal local opposition to foreign business influence in the country," AFX reported.

Citigroup entered into the largest settlement ever with the U.S. Federal Trade Commission in 2002 -- agreeing to pay $215 million. In that agreement, Associates First Capital, a unit it acquired 2000, was charged with engaging in systematic and widespread deceptive and abusive lending practices.

Last year, Citigroup Inc. and subsidiary CitiFinancial entered into an agreement with the Federal Reserve Board to settle -- for $70 million -- charges that it violated federal lending requirements and tried to mislead federal examiners.

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