WASHINGTON – The Federal Reserve on May 28 issued a consentOrder to Cease and Desist and an Order of Assessment of Civil MoneyPenalty against Citigroup Inc. and its credit subsidiaryCitiFinancial Credit Co. and ordered the largest financialinstitution in the U.S. to pay a penalty of $70 million forviolating provisions of the Equal Credit Opportunity Agency andHome Ownership and Equity Protection Act of 1994 regardingpractices related to borrowers taking out riskier, higher-interest“subprime” personal and home mortgage loans. The Fed allegedBaltimore-based CitiFinancial violated federal regulations when itimproperly required the signature of a co-applicant on some loanswhen the creditworthiness of the person taking out the loan wasalready sufficient. The Federal Reserve charged those violationscame “in connection with attempts to increase joint insurance salesthrough an increased volume of co-applicant loans.” The Fed saidCitiFinancial also allegedly misled regulatory examiners whointerviewed company employees. While allegedly not admitting to anywrongdoing, Citigroup and CitiFinancial Credit consented to theissuance of the Fed's order and agreed to take steps to ensurecompliance with federal lending regulations and to enhancecompliance with consumer protection laws. The Fed said restitutionwill be made available to borrowers who purchased joint creditinsurance in connection with a co-applicant loan from CitiFinancialor any one of its U.S. retail branches from Jan. 1, 2001 – Dec. 31,2002. Restitution will also be made available to certain borrowerswhose personal loans from CitiFinancial or its subsidiaries wererefinanced by CitiFinancial to an “EquityPlus” loan. The Fed saidthe $70 million penalty could be reduced by up to $20 milliondepending on the amount of restitution actually made to somesubprime personal and home mortgage borrowers. -

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