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Banking Department Enforcement Action Against Citigroup,
Commitment Letter Regarding Implementation of Agreements Made With the Department

June 22, 2001
Mr. Sanford I. Weill
Chairman and CEO
Citigroup, Inc.
399 Park Avenue
New York, New York 10043

Mr. Robert B. Willumstad
CEO Consumer Group
Citigroup, Inc.
300 St. Paul Place
Baltimore, MD 21202

Re: Implementation of Agreements with the New York State Banking Department

Dear Messrs. Weill and Willumstad:

This letter will evidence the commitment of Citigroup to the New York State Banking Department ("NYSBD") to take the actions provided for herein. 

Summary of Facts:

1998 Letter:

As part of the 1998 proposed merger between Citicorp and Travelers, the NYSBD analyzed the lending performance of "Citibank Lenders" as defined in a July 22, 1998 letter agreement between Citicorp and the NYSBD. As a result of the NYSBD’s analysis of the lending performance of the Citibank Lenders, the NYSBD determined at that time that, throughout the state, these lenders significantly trailed the adjusted aggregate in terms of HMDA reportable lending in majority minority census tracts in 1996 and 1997. However, in upstate New York there was a very significant increase in such lending in majority minority tracts in the first six months of 1998. 

Accordingly, Citicorp entered into a letter agreement with the NYSBD in which it projected that (a) Citibank Lenders would meet or exceed their level of lending in certain majority minority census tracts upstate for 1998, 1999 and 2000 and (b) Citibank Lenders would meet or exceed the level of lending by the adjusted aggregate market averages (as defined in the 1998 letter) in certain majority minority census tracts downstate for the same three years.

While it is true that the Citibank Lenders met or exceeded each of these projections, the overwhelming majority of the loans made were small home improvement loans of $1,000 each or less. This element of the Citibank Lenders’ home improvement loan program, which you indicated was designed to supplement the Citibank Lender’s conventional loan programs, had never been discussed with the NYSBD during negotiations over the 1998 letter agreement. This would have had an effect on the Department’s view of the program.

Associates HMDA:

As part of the fair lending examination of Associates Home Equity Service, Inc. and Associates Consumer Discount Corporation, it has been determined that the 1999 and 2000 HMDA data submitted by those lenders pursuant to the federal Home Mortgage Disclosure Act is erroneous as it pertains to loans in New York State. (This matter is not related to the 1998 letter agreement discussed above).

CitiFinancial Initiatives:  

In considering the appropriate response to the foregoing, the Department took into account certain actions detailed below.

As part of the 2000 acquisition of The Associates, CitiFinancial issued a letter dated November 7, 2000 to the NYSBD, the Comptroller of the Currency and the Federal Deposit Insurance Corporation. On November 28, 2000, after extensive negotiations with the NYSBD, CitiFinancial issued a supplemental letter to the same three regulatory agencies.

As part of the monitoring of the implementation of the representations contained in the November 28, 2000 letter, the NYSBD has made certain suggestions that CitiFinancial has adopted regarding the Referral-Up and the Single Premium Credit Insurance pilot programs.

Specifically, with regard to the Referral-Up pilot, the NYSBD suggested that CitiFinancial adopt a script and letter that more pro-actively encourage borrowers to take advantage of the possibility of receiving from another Citigroup affiliate a mortgage at lower rates than the one available from CitiFinancial. In addition, CitiFinancial has agreed to adjust the criteria utilized for referral so as to ensure that they are equivalent to the criteria utilized by the Citigroup affiliate receiving the referral on non-referred loans.

With regard to the Single Premium Credit Insurance pilot, the NYSBD suggested that CitiFinancial adopt a script and documents that begin by quoting the monthly payment for the approved loan without any insurance. A comparative chart will be provided to borrowers setting forth the cost of single premium credit insurance versus the cost of monthly premium credit insurance. In addition, CitiFinancial changed its script and documents to make clear that with a single premium policy there will be no protection after a certain number of years even though the borrower is still paying for the policy.

Citigroup implemented the changes suggested by the Department.


To avoid additional special regulatory action based upon the foregoing, Citigroup, on behalf of itself and CitiFinancial and Citibank Lenders (and to the extent necessary to fully effectuate the commitments herein, Citigroup shall take action to cause CitiFinancial and Citibank Lenders to undertake such commitments more specifically), agrees to the following:

In the upstate areas (i.e., areas 1 through 4), these projections concern only HMDA reportable loans of not less than $3500 of which 50% will be $5500 or more. In the downstate areas (i.e., areas 5 through 11), these projections concern only HMDA reportable loans of not less than $5500 of which 50% will be $7500 or more.

Citibank Lenders will provide the NYSBD with confidential semi-annual reports of this lending on or before March 31 and August 31 of each year. The first such report will be made available on or before March 31, 2002, and the last such report will be made available on or before March 31, 2004.

The commitments made by Citigroup herein, as evidenced by the signature below, shall be binding on Citigroup and its successors and assigns. This commitment letter shall not bar, estop or otherwise prevent the Superintendent, or any state agency or department or any other person, entity or agency from taking any other action affecting Citigroup, CitiFinancial and Citibank Lenders on any matter not covered by this letter agreement. The commitments expressed herein may not be modified or amended without the prior written consent of the Superintendent.

This commitment letter shall be presented to the Board of Directors of Citigroup at its next regularly scheduled meeting.

This commitment letter shall not be confidential.

Very truly yours,

Elizabeth McCaul
Superintendent of Banks

Agreed to and Accepted:

Sanford I. Weill
Chariman and CEO




Robert B. Willumstad
CEO Consumer Group


Department of Financial Services


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