Inner City Press Community Reinvestment Reporter 2003-2004

   Click here for Current CRA Reporter

     Welcome to Inner City Press’ CRA Report.  Our other Reporters cover the financial services industry, human rights, the Federal Reserve, and other beats.  ICP has published a book about the CRA-relevant topic of predatory lending - click here for sample chapters, a map, and ordering informationCBS MarketWatch of April 23, 2004, says the the novel has "some very funny moments," and that the non-fiction mixes "global statistics and first-person accounts."  The Washington Post of March 15, 2004, calls Predatory Bender: America in the Aughts "the first novel about predatory lending;" the London Times of April 15, 2004, "A Novel Approach," said it "has a cast of colorful characters."  See also, "City Lit: Roman a Klepto [Review of 'Predatory Bender']," by Matt Pacenza, City Limits, Oct. 2004.  The Pittsburgh City Paper says the 100-page afterword makes the "indispensable point that predatory lending is now being aggressively exported to the rest of the globe." Click here for that review; click here to Search This Site

December 27, 2004

  In the week leading to Christmas, ICP made supplemental filings on Toronto Dominion - Banknorth and BBVA-Laredo National Bank, summarized in this week’s Bank Beat Report. In the Memphis Commercial-Appeal of December 22, Rep. Harold Ford (D-TN) presented financial literacy as the solution to predatory lending, and favored a federal law which would preempt state consumer protection laws.  A review of campaign contributions in the 2003-2004 election cycle finds, among Rep. Ford’s contributors, the following: Cash America International (PAC), $1000; two Cash America executives, at $1000 each; Jeffrey Weiss, the CEO of payday lender Dollar Financial Group, $1000; Darrin Andersen, the CFO of fringe lender QC Financial Services, $1000; and CSFA board members Kim Gardner  and Jim Frauenberg of Buckeye Checking, Inc....

            CitiFinancial is now offering high-cost loans through pawn shops in Poland.   The Polish News Bulletin of December 20 reported that “Kantor Polski (KP), a new financial services provider was launched today... The idea of forming KP was put forward by The Polish Currency Exchange and Pawnshop Association (SKiLP). Apart from the normal services currency exchanges supply, KP will offer clients CitiFinancial (financed by Bank Handlowy) consumption and cash credits.”

            HSBC, or at least its chairman John Bond, is deeply in denial.  From the Financial Times of December 24: “Household has faced accusations of predatory lending from consumer groups but Sir John attributes Household's problems to ‘one or two rogue branches.’”  One or two branches?  Perhaps the easiest rebuttal is the fact that dozens of U.S. states sued Household for predatory lending, in 2002, and the company settled.  Old Sir John apparently hasn’t read those court papers, nor the subsequent voluminous documentation of ongoing predatory lending at Household.  He either doesn’t know or doesn’t care, or both.  For shame...

December 20, 2004

            Payday and pawn shops in the news: last week in Pittsburgh, the City Council passed an ordinance prohibiting payday lenders from being open more than nine hours per day; from allowing bars, chains or other security devices from to be viewed from public streets and sidewalks; and from being within 500 feet of a residence or 1,000 feet of another outlet or pawn shop.

            Meanwhile, here’s what the Spanish (and Mexico-based) bank BBVA had to say last week, in response to ICP’s comments on its and its target Laredo National Bank’s support of fringe finance: “such loans are extended in the ordinary course of their lending to small businesses.” And that’s one of the problems, that no additional due diligence is done before supporting a business engaged in high-cost lending, in the banks’ Community Reinvestment Act service area.  BBVA claims that as to the practices of Valley Bank, which it acquired earlier this year, “that application was the proper forum in which to raise [those] concerns. In fact, neither ICP nor any other community organization submitted any comments in connection therewith.”  So the bank’s argument is that it is not responsible for anything it acquired, unless that acquisition was challenged.  By that logic, community and consumer organizations should comment much more than they currently do, in order to avoid what’s called “issue preclusion.” Something to keep in mind, in 2005...

 On December 14, Federal Reserve ruled on Fifth Third - First National Bank of Florida, which ICP challenged in late October. Footnote 23 says that

“One commenter [that’d be ICP] criticized Fifth Third’s relationships with unaffiliated payday lenders, car-title lending companies, and other nontraditional providers of financial services. As a general matter, these businesses are licensed by the states where they operate and are subject to applicable state law. Fifth Third also responded that it has entered into lending relationships with several check-cashing organizations, pawn shops, and rent-to-own companies, but that it plays no role in the lending practices, credit review, or other business practices of those borrowers. Fifth Third represented that in all such cases, it requires borrowers to represent and warrant to Fifth Third that they comply with applicable laws.”

This (for now) is weaker than the standard the Fed uses in looking at banks’ business dealings with subprime mortgage lenders: there, the Fed appears to be looking for the bank to have done some due diligence, and not simply relying on the subprime lender’s “warranty” it complies with law. ICP’s campaign on predatory fringe finance continues.

            At last week’s House Financial Services hearing in Boston, Bank of America was evasive, and, as reported by the Toronto Star of December 17 with regard to ICP’s challenge to TD-Banknorth, “Inner City made the same charges at a hearing of the House of Representative's financial services committee held in Boston this week to look into bank mergers. It was joined in its concerns by John Quinn and Andrea Nuciforo, members of the Massachusetts legislature who submitted testimony to the hearings.”  And so it goes...

December 13, 2004

   The fall-out from bank mergers will be considered this week, including at the House Financial Services Committee’s field hearing in Boston.  ICP / Fair Finance Watch has submitted testimony, which is summarized below. Because it’s still pending, ICP focuses on Toronto Dominion’s proposal to acquire 51% of Banknorth.  Another focus is the layoffs (any, many say, lying) that followed Bank of America’s takeover of Fleet.  On that, a co-chairman of the Massachusetts Legislature's banking committee has filed a bill that would require banks to estimate changes in staffing levels as a result of a proposed merger. The bill would require banks to submit one, three- and five-year estimates of how staffing levels would be affected by a big bank merger.   Last week, BofA’s Ken Lewis refused to say how Massachusetts jobs compare with levels before the merger, saying the bank will release that data in early 2005. We’ll see.  And here now a summary of ICP’s testimony:

Testimony to the House of Representatives Committee on Financial Services

            On behalf of the non-profit organization Inner City Press / Community on the Move and the Fair Finance Watch (ICP), this submission addresses the impact on communities and consumers of two completed mergers and one merger proposal that has not been approved, and on which the Committee can and should still have an effect: the proposal by Toronto Dominion to acquire a controlling 51% stake in Banknorth, for over three billion dollars.  On November 15, ICP submitted to the Federal Reserve a 15-page comment opposing Toronto Dominion's application, based on lending disparities, on managerial issues at Toronto Dominion including enabling of Enron and lack of environmental standards, and on Banknorth’s funding of high-cost pawnshops, check cashers and other predatory fringe finance.  See, e.g., <>, and Toronto Star of Nov. 21, 2004, Pg. C1, “Merger Snags,” by Stuart Laidlaw:

"’The impact on the consumer is at least as important as the price paid to shareholders,’ [the] executive director of Inner City Press, said in an interview from his office in the Bronx. In a filing with the Federal Reserve Bank of New York, which must approve the deal, Lee looks at the bank's lending rates in several markets. In Hartford, Conn., for instance, only 2 per cent of its loans were to blacks and Hispanics, while the average among all banks was 6.8 per cent. He called the problem ‘systemic.’ Under the U.S. Community Reinvestment Act, banks are expected to fully serve disadvantaged neighborhoods. Lee's group uses the act to get banks to make commitments to boost their loans to the poor and racial minorities whenever those banks are hoping to get a deal approved by the Fed. ‘Pretty well the only way it is enforced is through the denial of deals,’ he said.”

As relates to this hearing’s meta-merger policy question, if the only enforcement mechanism of the CRA is regulatory agencies’ denial or conditioning of banks’ expansion applications, then the CRA is not being (sufficiently) enforced.  For example, during the JP Morgan Chase - Bank One proceeding, ICP submitted to the Federal Reserve a series of Uniform Commercial Code filings showing the two banks financing payday lenders such as First Cash Financial Services, a top-ten pawnshop chain with 130 storefronts in 11 states; Illinois Payday Loans, Inc., Discount Payday Loans of Colorado; Mister Payday of Kentucky, Inc., and First American Cash Advance, a top-ten payday lender with 330 storefronts in 11 states -- a company which has been extensively criticized for its high-cost lending, particularly to members of the military. For that, see the Washington Post of December 29, 2003, "Military Says Payday Loans Promote Fiscal Irresponsibility, Hurt Troop Morale."

While the FRB asked JP Morgan Chase and Bank One questions about their funding of payday lenders, car title lenders and other questionable bottom-tier financiers, the FRB did not impose any prohibition on such standardless practices. The Federal Reserve leaves the onus on the community and consumers groups themselves.  This can bear some results -- simply as to ICP this year, consider that SunTrust Banks, in response to ICP’s comments, committed to cease funding payday and car title lenders. See, e.g., "NCF, SunTrust Ditch Payday Lenders: Answer Activists' Challenge Ahead of Bank Merger," Memphis Commercial Appeal, July 28, 2004; "Bank Shuns Payday Lenders: SunTrust Halts Loans to Fast-Cash Industry," Orlando Sentinel, July 28, 2004, Pg. C1, and "Saying No to Exploitation -- Our Position: SunTrust Was Right to End Business with Payday and Car-Title Lenders," Orlando Sentinel, July 30, 2004, Pg. A18.

But other large banks, not only JP Morgan Chase but also Bank of America, Wachovia and Wells Fargo (and pertinently also Banknorth, and certain other banks with pending merger applications, such as Laredo National Bank and Fifth Third Bank) continue such funding. See, e.g., Bloomberg News of Nov. 23, 2004, “JPMorgan, Banks Back Lenders Luring Poor With 780 Percent Rates,” at, and see <>. 

The FRB has also fallen into a pattern of granting banks’ requests for confidential treatment under the FOIA for their lists of payday lenders and others fringe financiers they partner with, even though these relationships are “already public” in UCC filings. This has required a tangent from consumer protection into FOIA litigation, such as ICP is conducting in the wake of the FRB’s Wachovia-SouthTrust approval.  See, e.g., "Community Group: Fed Must Reconsider Wachovia-SouthTrust," Dow Jones, October 25, 2004.

As the Committee can see from the FRB’s Orders, while the FRB recites and gives weight to banks’ unilateral lending pledges, the FRB subsequently refuses to enforce or even monitor such pledges.  As a meta-merger policy recommendation, ICP suggests that the BHC Act be amended, at 12 USC 1848, to explicitly provide for judicial review of FRB approval orders on consumer and community lending issues. In the interim, most practically, inquiry should be made into the FRB’s anti-consumer processing of the pending TD-Banknorth application, as well as other pending mergers including BBVA-Laredo National and applications by Wells Fargo and Citigroup in Texas, and Fifth Third in Florida.

   Regarding the first of these (which was named at the time this hearing was scheduled, see CBS MarketWatch of October 7, 2004, Home Mortgage Disclosure Act (HMDA) data reported for 2003 show that Banknorth disproportionately excludes and denies African Americans and, particularly, Latinos.  In the Albany, New York MSA for refinance loans in 2003, Banknorth denied Latinos 4.31 times more frequently than whites, and denied the conventional home purchase loan applications of  Latinos 4.83 times more frequently then whites. For refinance loans here in the Boston MSA in 2003, Banknorth denied Latinos 3.17 times more frequently than whites, while using the methodology above, only 1.3% of Banknorth’s refinance loans were to Latinos, lower than the aggregate’s 2.2%.  In the Boston MSA, Banknorth denied the conventional home purchase loan applications of African Americans 11.8 times more frequently then whites.    In the Lowell, Massachusetts MSA, Banknorth denied the conventional home purchase loan applications of African Americans 8.92 times more frequently then whites, and denied Latinos’ applications 10.8 times more frequently than whites [More analysis available in ICP’s Bank Beat Report].

            There are other adverse issues at Toronto Dominion, including managerial issues: there’s Toronto Dominion’s enabling of Enron’s fraud (see, e.g., the Houston Chronicle of December 03, 2003, “THE FALL OF ENRON: Banks added to shareholder suit;” note that evidence submitted to the Senate Permanent Subcommittee on Investigations’ hearings identified Toronto Dominion as actively engaged in illegitimate trades with Enron to disguise loans received by the company, allowing Enron to hide this debt from credit rating agencies and investors, inflating profits substantially.

            As to Wells Fargo, ICP's ongoing review of Uniform Commercial Code (UCC) filings from Texas, Nevada, Illinois, California and elsewhere has found Wells funding and enabling [see ICP’s Wells Fargo Watch]. In response, Wells Fargo has told the FRB, in its last expansion commented-on by ICP, that its subprime subsidiary on Puerto Rico

"Island Finance does not have a specialized customer service department or a toll-free telephone number for complaints. Customers who have complaints contact the store handling their account. If the store is unable to resolve the complaint the complaint if referred to the district manager. If the district manager is unable to resolve the complaint it is referred [to] the district manager's supervisor." (Wells Fargo's submission to the FRB dated August 11, 2003, at 11).

            That Wells’ Puerto Rico-based Island Finance has even less consumer protection safeguards that Wells Fargo Financial's overall operations is significant -- and, ICP contends, is violative of the Fair Housing Act and Equal Credit Opportunity Act, given the demographics of Island Finance's headquarters and its lending operations. But the FRB has done nothing, including in connection with Wells’ currently pending application to acquire yet another bank, in Texas.

            To endeavor to address the meta-merger issues, here is a review of service-cuts and branch closures by Bank of America and its predecessor(s) acquisitions of Boatmen's Bancshares, Barnett Banks, and then (then San Francisco-based) Bank of America itself. [See ICP’s BofA Watch Report.] Bank of America’s layoffs, following its acquisition of Fleet, are already of record -- but they are part of the historical pattern sketched above...

  And here’s an update on JPM Chase: as set forth above, throughout 2004, JPM Chase has been under fire for funding and enabling payday lenders.  Among its defenses, to those who would listen, was that it wanted to keep doing business with check cashers, and that payday lending and check cashing are often intertwined.  Then, from last Friday’s American Banker: JPM Chase “In July, SunTrust Banks Inc. said it would stop lending to check cashers and payday lenders, though it did not bar them from seeking deposit relationships. JPMorgan Chase said in September that it plans to exit the business by the end of the first quarter. ‘We were seeing increasing financial risks and lower profitability,’ said spokesman Thomas Kelly.”  First, the American Banker has mis-reported SunTrust’s announcement (its response to ICP’s comments was that it would no longer lend to payday lenders or car title lenders).  Second, when and where was it, that JPM Chase said it won’t lend to check cashers after March 31, 2005?  And what, now, of JPM Chase’s (always bogus) argument that in order to serve check cashers, it had to continue with payday lenders? 

December 6, 2004

            In predatory payday lending news, Advance America last week filed with the SEC an amended offering document, leading up to an IPO the date for which it hasn’t yet set. That’s not surprising: Advance America is being grilled in North Carolina, has had to suspend payday lending in Georgia, and discloses in its SEC filing it’s being contacted by investigative journalists. Then again, the mounting wave of outrage of this industry didn’t stop QC Holdings -- which runs Quik Cash, Nationwide Budget Finance, California Budget Finance and First Payday Loans -- from going public last summer for $14 a share, now up to $17...  Advance America’s Billy Webster stands to make at least $8 million; the company’s chairman George D. Johnson Jr. is in line for $19 million...

            In other payday and predatory news, ICP has timely challenged Wells Fargo’s Texas application, including on grounds of Wells’ support for payday lenders, including Armed Forces Loans, Inc., which targets active-duty soldiers. Last week, ICP received a partial copy of Wells Fargo’s November 29, 2004 response, which at page 34 states that “Confidential Exhibit 9 (Question 6) contains a list of businesses with which Wells Fargo maintains a business relationship whose business operations may constitute subprime lending. This exhibit includes the [NAICS] code for these businesses, and the Wells Fargo lending group providing lending or services to each business.”   This is an outrageous withholding, given that ICP and now Bloomberg News (see below) have identified many of the fringe financiers which Wells Fargo funds or otherwise enables. Additionally, the above quoted does NOT fully respond to the Federal Reserve’s Question 6, which asks not only about subprime lenders, but also “providers of non-traditional financial services (such as check cashers, pawn shops, or rent-to-own businesses).”   An additional response must be demanded and released, ICP has commented to the Fed...

            In the Fifth Third - FNBF proceeding, page 16 of Fifth Third’s Nov. 23 submission states, in response to an FRB request for (required) information, that “Fifth Third has entered into lending relationships with the check cashing organizations, pawn shops, rent-to-own companies and other alternative lenders (collectively ‘Alternative Lenders’) listed on Confidential Exhibit 3.” ICP has now contested this withholding, under the Freedom of Information Act...

November 29, 2004

            A stealth but interesting CRA question has arisen: what are the duties of a bank that takes deposits nationwide, in the form of health savings accounts?  The process here is driven by Congress. On Jan. 1, 2004, legislation became effective which promotes these health savings accounts.  Several banks jumped on the bandwagon.  Banknorth, whose proposed half-acquisition by Toronto Dominion ICP opposed earlier this month, has made health savings announcement.  And, on September 8, Webster Bank of Connecticut announced a proposal to buy Wisconsin’s State Bank of Howards Grove, whose main (but not only) operating unit is HSA Bank, the self-proclaimed industry leader.

            ICP has now filed timely comments on Webster Bank’s application, noting among other things that Webster funds car title pawns and straight-up pawn shops, that its lending is disparate -- and on the issue of what ICP argues would be its nationwide CRA duty, if it were to acquire HSA Bank.  A summary of ICP’s comments is below.

      Meanwhile, ICP’s challenge to Toronto Dominion’s proposed acquisition of control of Banknorth has been reported for example in the Boston Globe, the Stamford (CT) Advocate, the Portsmouth (NH) Herald News, the Portland (ME) Press Herald, and north of the border, for example on the CBC.  See this week’s Fed Watch report, on the Federal Reserve’s duties with regards to major banks’ funding of payday lenders.  Here’s ICP’s just-filed Webster comment:

Board of Governors of the Federal Reserve System
Attn:  Chairman Alan Greenspan, Governors, Secretary Johnson
20th Street and Constitution Avenue, N.W.
Washington, DC 20551

Re:       Timely comment opposing and requesting public hearings on the proposal of Webster Financial Corporation to acquire 100 percent of the voting shares of Eastern Wisconsin Bancshares and State Bank of Howards Grove

Dear Chairman Greenspan, Governors, Secretary Johnson, FRB: 

            On behalf of Inner City Press/Community on the Move and its members and affiliates, including the Fair Finance Watch (collectively, “ICP”), this is a timely comment opposing, requesting public hearings on the proposal of Webster Financial Corporation and its subsidiaries (“Webster”) to acquire 100 percent of the voting shares of Eastern Wisconsin Bancshares and State Bank of Howards Grove (“State Bank”).

            ICP is opposed to the Webster - State Bank proposal under the Community Reinvestment Act, based on Webster’s systemic lending disparities, and its enabling of high-cost fringe financier, including pawn shops, car title lenders and others.  ICP’s research in publicly-available Uniform Commercial Code (“UCC”) filings has found Webster funding and enabling for example TC’s Auto Pawn, Inc. -- within Webster’s CRA assessment area (see attached).

            Note that in recent FRB proceedings, SunTrust has made commitments to cease funding car title lenders as well as payday lenders, and Citigroup has made representations concerning not funding, for example, check cashers. What standards does Webster have?  Apparently none. At an absolute minimum, the FRB must ask Webster the same questions as to standards (and full disclosure of fringe financial links) that it has asked, inter alia, Huntington, Wachovia and SouthTrust, BNP, North Fork (including regarding check cashers, rent-to-own and pawn shops), etc.. ICP is requesting a hearing and that the Webster - State Bank applications be denied.

Beyond Webster’s troubling enabling of predatory fringe finance, here is an analysis of the mortgage lending of Webster Bank in the most recent year for which HMDA data is available: 2003.

In the Hartford Metropolitan Statistical Area ("MSA") in 2003, for mortgage refinance loans, Webster denied African Americans’ applications 4.21 times more frequently than whites, and also denied Latinos’ applications 4.24 times more frequently than whites.  Webster's higher-than-aggregate denial rate disparities are not explained by any greater-than-normal outreach with normal-priced credit to African Americans or Latinos.  In 2003 in the Hartford MSA,  Webster made 700 refinance loans to whites, only 83 to African Americans, and only 48 to Latinos.  By contrast, the aggregate industry in the Hartford MSA in 2003 made 2397  such loans to African Americans, 1484 to Latinos, and 52,652 to whites.  For these three groups, the aggregate made 4.2% of its loans to African Americans, and 2.6% to Latinos.  For Webster, the figures were notably lower: only 2.4% of Webster’s loans were to African Americans, and only 1.4% to Latinos (while the aggregate made 4.2% and 2.6% respectively).  The same disproportionate exclusion is evident in Webster’s conventional home purchase lending in this MSA: using the methodology above, 1.8% of Webster’s conventional home purchase loans were to African Americans (lower than the aggregates’ 5.5%), and only 2.3% of Webster’s loans were to Latinos (much lower than the aggregates’ 5.4%). Meanwhile, Webster denied the conventional home purchase loan applications of African Americans 2.98 times more frequently than those of whites.

Webster’s denial rate disparity to African Americans is systematic.  In the New Haven MSA for refinance loans in 2003, Webster denied African Americans 2.95 times more frequently than whites. Again, Webster's higher-than-aggregate denial rate disparities are not explained by any greater-than-normal outreach with normal-priced credit to African Americans or Latinos.  In 2003 in the New Haven MSA,  Webster made 1274 refinance loans to whites, only 25 to African Americans, and only 21 to Latinos.  By contrast, the aggregate industry in the Hartford MSA in 2003 made 1307 such loans to African Americans, 819 to Latinos, and 23,343 to whites.  For these three groups, the aggregate made 5.1% of its loans to African Americans, and 3.2% to Latinos.  For Webster, the figures were notably lower: only 1.9% of Webster’s loans were to African Americans, and only 1.6% to Latinos (while the aggregate made 5.1% and 3.2% respectively).  The same disproportionate exclusion is evident in Webster’s conventional home purchase lending in this MSA: using the methodology above, 4.7% of Webster’s conventional home purchase loans were to African Americans (lower than the aggregates’ 8.4%), and only 1.8% of Webster’s loans were to Latinos (much lower than the aggregates’ 7.6%).

For refinance loans in the Bridgeport MSA in 2003, Webster denied Latinos 4.38 times more frequently than whites. In this Bridgeport MSA, Webster denied the conventional home purchase loan applications of African Americans 4.71 times more frequently then whites, and denied those of Latinos 4.2 times more frequently than whites’.  Webster’s disparities are systemic.

            Hearings are also needed on the unique issues raised by State Bank’s line of business that Webster seeks to acquire (the HSA Bank), and the disruptions caused by Webster’s splitting of State Bank into HSA and retail divisions.  As regards the Community Reinvestment Act, it is imperative to note that Webster seeks to acquire, and grow, deposit-taking in all 50 states -- which should require CRA performance, and a CRA plan, on a nationwide basis.  See, e.g., the Connecticut Post of September 8, 2004:

“Webster plans to sell the two retail branches, which operate as State Bank of Howards Grove with the trade name HSA Bank, and keep $100 million in health savings account deposits, said Nathaniel C. Brinn, Webster's executive vice president, corporate development.   ‘We've been looking at whether to get into the [HSA] market, and how to do it,’ since the Medicare Prescription Drug, Improvement & Modernization Act of 2003 allowed them beginning Jan. 1, 2004, Brinn said. Through a health savings account, individuals can set aside up to $2,600 a year - $5,150 for families - of before-tax, tax-deferred income they can use for medical expenses. But, unlike other accounts, the depositor doesn't lose the money if it's not used in a certain time. Instead, it earns interest and can be tied to a brokerage account, said Brinn. ‘That account will be kind of like a checking account, or money market account,’ he said.  This is not Webster's first acquisition out of its core banking market of Connecticut, New York and Massachusetts. For example, Webster operates insurance and an equipment financing business.’Our motivation is deposit-gathering on a national scale,’ said Brinn.”

            Webster’s publicly-stated motivation is “deposit-gathering on a national scale” -- which brings with it a concomitant Community Reinvestment Act duty, on which ICP is requesting a hearing.  Another subject for the hearing is the effect on the convenience and needs of the communities to be served of Webster’s planned splitting-off and ditching two service-providing branches, in Howards Grove and Beaver Dam. See, e.g., the Sheboygan Press of September 9, 2004: “Elwood Riese of How-ards Grove, an account holder at the bank, said he was surprised by the announcement. ‘I just wonder if it'll still be a bank yet or not,’ said Riese, 73.” To buy a whole bank to retain only a piece of it, while causes disruption to retail customers, requires the hearing that ICP timely requests.

            Scrutiny is needed of a proposed bank acquisition driven nearly entirely by recently legislative and regulatory change: in this case, the Jan. 1, 2004, effective date of the Medicare Prescription Drug, Improvement & Modernization Act of 2003 (see above). As noted in the American Banker newspaper of September 8, 2004

“One obstacle to large-scale adoption, however, has been concerns about regulatory compliance. The Treasury Department has issued some guidance on compliance issues in recent months. Mr. Brinn acknowledged that ‘there's a tremendous amount of compliance review that banks need to consider when entering this market.’ [Webster CEO James C.] Smith also noted that the need for extensive regulatory compliance will probably make most banks reluctant ‘to dabble in this business,’ leaving a clear advantage to the banks, like his, that make a commitment early.”

            The proposal raised unique issues not only under the CRA (nationwide deposit-gathering), but also issues of regulatory compliance, that need to be explored at the hearing ICP is requesting.

There are other adverse issues at Webster, including managerial issues, which should be explored at the hearing.  Given the nexus between health savings accounts, and medical savings accounts before them, and the employee-employer relationship, see, e.g., “Former Employee Files Suit against Webster Bank,” Waterbury Republican-American, March 2, 2002:

A former teller with Webster Bank has filed a lawsuit against the city-based bank alleging she and other employees were not paid overtime or for hours they worked beyond their 37.5-hour work week. West Hartford Attorney Gary Phelan, who filed the suit on behalf of Meriden resident Billie Jo Westfort, said he will also file a motion to certify the suit as a class-action, as the number of potential parties could include an estimated 500 tellers and customer service representatives. The suit was filed United States District Court for the District of Connecticut... Westfort worked from August 2000 to about February 2001 as a teller in Webster's Meriden bank branch where tellers and customer service representatives were paid on an hourly basis. As a teller, the suit claims, Westfort was a ‘nonexempt’ employee under federal labor and state laws, meaning she was entitled to overtime pay when working more than 40 hours per week.

Because of understaffing at the Meriden branch, the suit charges that Westfort and other tellers were regularly required to work more than 40 hours a week during 2000 and 2001. Westfort worked 42 to 45 hours each week, but was only paid for 37.5 hours per week, according to court papers, and ultimately resigned because Webster refused to pay overtime or wages beyond 37.5 hours. ‘The branch manager of the Meriden branch office in 2000 was repeatedly told by the defendant that she was not to pay either overtime to any employee or any wages for hours spent beyond 37.5 hours per week,’ the suit states. ‘The same order was issued ... to other branch managers throughout Connecticut.’

The suit charges similar understaffing existed in Webster branches throughout the state and other employees there were also required to work excess hours, but were not paid for those hours. Webster operates more than 100 branches across Connecticut and has recently embarked on an aggressive expansion that calls for adding as many as 20 branches during the next three years.

       The “understaffing” issues raised in the above are also relevant to the convenience-and-needs and CRA factors which the Federal Reserve must consider, including at the hearing ICP is timely requesting.  Webster Bank has been involved in mortgage lending at rates described as “exorbitant,” see, e.g., Hartford Courant  of September 1, 2001:

Residents of the Spice Glen development have reached an agreement with Webster Bank that ends more than two years of uncertainty and allows them to remain in their homes. Under the terms of the deal, homeowners will be given modified loans that provide relief from their exorbitant monthly mortgage payments... Spice Glen, a complex of 43 single-family homes off South Quaker Lane built in the mid-1990s, had been pitched as an opportunity for first-time, moderate-income buyers to enter the housing market. But it soon became clear that many of the residents were unable to keep up with spiraling adjustable-rate mortgages.”

       This calls into question Webster’s due diligence, its CRA compliance and its safeguards against predatory lending. ICP is requesting a hearing on each of these issues.

           More needs to be (and will be) said, but ICP will await copies of the FRB's correspondence with and about Webster (or State Bank and its affiliates) and the banks' responses. Specifically, based on prior FRS precedents, at a minimum the following question(s) should be asked, and publicly answered:

"For any business relationship (e.g. commercial lender, warehouse lender, purchaser, custodian, etc.) that Webster or State Bank or any of their affiliates have with any subprime lenders (including providers of non-traditional banking products, such as check cashers, title lenders, pawn shops, or rent-to-own businesses): (i) identify the relevant business parties and (ii) describe the nature of the business relationships... Additionally, to the extent not otherwise covered in your responses to the comments of the Inner City Press Community on the Move & Fair Finance Watch, describe any due diligence that Webster typically conducts concerning any such subprime lender's compliance with applicable fair lending and consumer protection laws prior to Webster entering into these business relationships, including... (c ) any monitoring or other ongoing procedures Webster has adopted to access compliance with these laws. Provide a copy of such procedures that are used to determine whether third party originators are engaged in, or facilitating, abusive and/or predatory lending practices."

   The answers to these questions should be made public, as argued in the FOIA appeal and complaint filed by ICP in connection with Wachovia - SouthTrust (the FRB was served with the complaint on October 25, 2004; the FRB’s cursory initial answer was filed last week).

Respectfully submitted,

Matthew Lee, Esq., Executive Director

  This will be updated; for or with more information, contact us.

November 22, 2004

  Never say you weren’t warned: over the weekend, news broke of steering to high-cost subprime loans within the mortgage company Countrywide, and its subprime doppelganger Full Spectrum.  The news centers around an email from late October, in which Full Spectrum regional vice president Shane Pew urges his staff to push even prime customers into high cost loans, by for example listing only one income when there are two wage earners, increasing the amount of the loan and not listing any of a borrower's assets. "We will not make money if we don't do Subprime PERIOD,” he wrote. "We have to think outside the box to make this happen."

Outside the box? Or inside the prison cell?  Inner City Press / Fair Finance Watch asserted just such steering within Countrywide, when the company applied to the Federal Reserve to become a bank holding company (and to the OCC to acquire a national bank).  Neither agency took effective action. But it’s not that they weren’t told...

Meanwhile, November 24 is the due-date for the Federal Reserve’s answer to the Freedom of Information Act complaint Inner City Press filed contesting the Fed’s withholding of basic information about Wachovia’s and SouthTrust’s support of payday and car title lenders...

 In further subprime news, according to the National Automotive Finance Association, the average lender repossessed 696 new and used vehicles a month in 2003, up from 624 vehicles in 2002... From the November 17 press release announcing that yet another payday lender, Cash Now, has gone public: “Payday loans is one of the fastest growing businesses in, not only the United States, but Canada, Australia, England, New Zealand, South Korea and more.”  And that’s what we’ll be covering more and more, going forward...

Toronto Dominion and Banknorth have yet to respond to the comments ICP/Fair Finance Watch filed on November 15 (see last week’s Bank Beat report, and Associated Press and  Merger Snags,” Toronto Star, November 21, 2004). This Toronto Star article opines that ICP’s opposition “cannot be taken lightly,” and quotes TD CEO Ed Clark that "We do not have the management team at the Toronto Dominion Bank in Canada to run a bank in the United States. We were attracted to Banknorth because it had that management." First, Banknorth’s management is reflected in the disparate lending ICP has documented in the Home Mortgage Disclosure Act data analyzed in last week’s Report.  And second, what does Clark’s statement say about the “managerial factors” that the Federal Reserve must review, in connection with the proposal?

November 15, 2004

          Interesting responses, last week, from Fifth Third and Wells Fargo.   Fifth Third, purporting to respond to ICP / Fair Finance Watch’s comment, has admitted to funding payday lenders, pawnshops and other fringe financiers -- while seeking to withhold its list.  Fifth Third’s response states:

“Fifth Third is aware that some banking organizations have voluntarily decided to discontinue relationships with check cashers, payday lenders, pawn shops, title lenders and similar organizations. See, e.g., SunTrust Banks, Inc., 90 Fed. Res. Bull. __ (Sept. 14, 2004).  However, Fifth Third does not believe that it should be required to take the extraordinary step of refusing to provide credit to an entire class of borrowers engaged in a perfectly lawful business that is extensively regulated in many states in order to obtain approval to complete a bank acquisition transaction. More generally, it should be noted that the bank regulatory agencies have stated that refusing to provide credit to check cashers, payday lenders and other businesses that provide alternative forms of credit could be viewed as harmful to consumers because these types of organizations provide services to numerous LMI individuals who may lack an established relationship with a bank. See, Remarks of John D. Hawke, Jr., before the American Bankers Association National Community and Economic Development Conference, 2002 OCC QJ 37 (June 2002); see also OCC Advisory Letter 2000-10 (Nov. 27, 2000) (noting that payday loans help consumers meet unexpected short term cash needs).”

  So -- Fifth Third claims that the OCC supports its lending to car title lender and payday lenders... Fifth Third also seeks to withhold information about payday lenders it does support; ICP is pursuing this, under the Freedom of Information Act, along the lines of ICP’s pending Wachovia-related FOIA lawsuit.

            Wells Fargo’s general counsel James Strother, with an opportunity to address Wells Fargo’s documented relationship with payday lenders including Armed Forces Loans, Inc., which directs its high-cost loans at active duty military personnel, has in a November 11 letter provided only boiler plate. “Wells Fargo and its affiliates have, on a transaction-by-transaction basis, acted as a lender or provider of credit facilities to unaffiliated entities engaged in consumer finance businesses which may including acting as a payday lender... Loan proceeds may or may not involve funding the actual lending operations of such entities...”.  Targeting high-cost payday loans at soldiers? ICP has replied, as well as filing the timely comments on TD-Banknorth summarized in this week’s Bank Beat Report....

November 8, 2004

       Surprise, surprise: from Citigroup’s November 4 response to Inner City Press/Fair Finance Watch’s submission to the Federal Reserve and Office of the Comptroller of the Currency of Uniform Commercial Code filings by Citigroup and its proposed acquisition, First American Bank:

“ICP attaches certain records of [UCC] filings related to several Citigroup and FAB clients... As a practice, Citigroup and its bank subsidiaries do no engage in the business of funding check cashing or payday lending businesses. Citigroup’s account opening procedures and credit policies generally prohibit the opening of new accounts for businesses identified as check cashing operations. Citigroup does have a single active relationship with an armored car company that also includes a checking account to an affiliate in the check cashing business. This account predates the Citigroup procedures for check cashers, and Citigroup has been in the process of winding down the relationship pursuant to a gradual exit strategy.

“In addition, on occasion check cashing businesses have become customers in connection with Citigroup’s acquisition of other financial institutions. In such cases, Citigroup undertakes a post-acquisition review of these relationships and takes action to close or limit them, when appropriate. Citigroup makes changes to conform with its business practices as expeditiously as commercially reasonable, yet in a manner that does not unduly disrupt the operations of an existing client... The UCC filings relating to Citigroup that were attached to ICP’s comment letter are dated 2001 and 2002. Citigroup has no active accounts with, and no outstanding loans to, any of the parties named in those UCC filings. Although some of these inactive accounts may still appear on Citigroup’s account system and Citigroup may not have revoked the UCC filings, Citigroup has not had a business relationship with any of these companies for at least two years.

“With respect to the UCC filings related to FAB that were attached to the comment letter, Citigroup has learned that they relate to pawnshops, not check cashing or payday lending operations.”

            Citigroup’s response is noticeably silent on when this “policy” was adopted.  Citigroup states that it “has not had a business relationship with any of these companies for at least two years.”  But, simply as one example, there is a February 20, 2003 UCC amendment, on “Debtors: MONTGOMERY CHECK CASHING CORP., Secured Parties: CITIBANK, N. A., AMENDMENT, 2/20/2003, 5:00PM, 1675531, 1675531, NJUCC.”  February 2003 is, obviously, within two years of the date of Citigroup’s response. 

   Citigroup did not respond to ICP’s presentation into the record of, for example, the relationships between Citigroup and Dollar Financial; questions must be answered concerning the application of these claimed policies to all of Citigroup’s subsidiaries, including for example its investment bank(s) and  CitiCapital, which it has owned since acquiring Texas-based Associates First Capital Corporation.  ICP has submitted to the agencies exhibits to these effects, and also a second timely comment on Wells Fargo. ICP in its first comment put into the record the commitment by another of Wells Fargo’s peers, SunTrust, to no longer fund payday lending or car title lending companies.   Now, as to Wells Fargo and check cashing companies, ICP has submitted some examples:








  We’ll see... Oh and ICP/Fair Finance Watch was just named an "anti-money laundering hero," for casting spotlight on Riggs-PNC, HSBC and Banco Santander...

November 1, 2004

   The scourge of payday and car title lending, and big banks’ funding and enabling of these predators, continues to be our focus.  On November 1, ICP / Fair Finance Watch filed opposition to Wells Fargo’s application to expand in Texas, documenting Wells’ funding of fringe financiers throughout Texas (as well as its targeting of people of color of higher-cost loans from Wells Fargo Financial).  This followed ICP’s timely October 28 filing on Fifth Third’s application to acquire First National Bankshares of Florida, for $1.6 billion.  See, “Consumer Group Challenges Fifth Third Deal,” American Banker, October 29, 2004.   The Federal Reserve has finally started asking PNC questions about its proposal to acquire [toxic] Riggs -- but PNC is trying to keep its answers confidential.  ICP is preparing an appeal, under the Freedom of Information Act. This follows ICP’s FOIA lawsuit against the Fed for withholding Wachovia’s and SouthTrust’s list of payday and car title lenders funded.  Enabling and coddling, these veils must be pierced...

  In other predatory news, in Tennessee, HSBC’s Household has been charged with being a racketeering enterprise under RICO. Some of the allegations, in a Federal suit assigned to U.S. District Court Judge Robert Echols: 1) Household misrepresented interest rates by trying to disguise a high-rate mortgage as a low-rate loan. The plaintiffs also allege that the company misled consumers into thinking that they were reducing their principal amounts because of lower interest rates, when in fact it was because of a requirement that they make extra payments; 2) Household lent money on terms that would eventually require large balloon payments, without disclosing the existence or amount of those balloon payments; and 3) the company applied payments to customers' accounts in such a way that even if a scheduled payment was not late, it would create a shortfall in interest, which resulted in excess finance charges.  Yep -- that sure sounds like HSBC’s Household...

            And GE’s subprime in Australia -- GE Money president and chief executive Tom Gentile told The Australian Financial Review last week that GE’s primed to make more acquisitions Down Under. "We think Australia is a great market and we have an active business development function," he said.  The interview followed GE's purchase of AFIG, including the Wizard Home Loan business, which has 230 branches in Australia, and makes GE Australia's sixth-largest mortgage player. ANZ Banking Group chief executive John McFarlane said GE was already a strong competitor in the finance area. McFarlane said ANZ would not compete with GE in the "sub-prime" lending market because it raised too many reputational issues.  Not to GE, it doesn’t -- they just batten down the hatches, keep everything confidential, and keep growing and growing in subprime, including globally...

October 25, 2004

  Earlier this month, Federal Reserve Governor Bies denied Inner City Press' Freedom of Information Act appeal for a list of the payday lenders and pawnshops funded by merger partners Wachovia and SouthTrust.  On October 21, Inner City Press filed a FOIA lawsuit in the U.S. District Court for the Southern District of New York, challenging the Fed's systematic withholding of predatory lending-related information.  The case has been filed; we will update its progress on this site.

   Meanwhile, in its second timely filing opposing Citigroup's proposal to buy First American Bank in Texas, ICP has documented the two's funding of pawnshops and check cashiers, including College Station Pawn & Cash Station Jewelry and Loan, Q-Pawn, Inc., Decker Prairie Pawn, Inc., Zerega Check Cashing Corp., Montgomery Check Cashing Corp. of 403 East Third Street, Mount Vernon, NY; Castle Check Cashing Corp., continued in 2002; City Check Cashing of Jersey City, NJ; and Rite Check Cashing Inc. and G&R Check Cashing Corp. of New York.  And what, after delay, will Citigroup say?

In other payday lending news from the field: Dallas-based lender FastBucks announced last week it plans to open its first Nashville office on November 1, at 5760 Old Hickory Blvd. in the Seven Points shopping center. Based on its projections, FastBucks believes 15 stores will be needed to service the Midstate fully, spokesman Mark Mahoney told the Tennessean...

  From the anti-payday lending fight in Australia: in Queensland in 2001 the State Government moved to force payday lenders to detail all fees and charges in writing to stop them exploiting a loophole in the Consumer Credit Code which exempted loans of less than 62 days. However, it stopped short of following Victoria, NSW and the ACT which capped interest rates for so-called payday loans at 48 per cent -- despite warnings from one of its own advisory committees of the risk of people being caught in a debt trap.  And so, this recent case: a woman borrowed $500 at an annual interest rate of 240 per cent. She agreed to repay $35 a week, of which $25 covered interest charges. However the woman kept incurring a $30 default fee because the payment date fell before the date of her pension payment. She had to borrow more money to stay afloat. The debt increased to $1300, despite the fact she had repaid $1600. (Source: Legal Aid of Queensland).  Keep those stories coming...

   Fast and loose at the "Paper of Record" -- the New York Times' October 20 article "U.S. Set to Alter Rules for Banks Lending to Poor" reported among its many inaccuracies that the CRA "gained strength in 1995, when the Clinton administration adopted a series of tougher guidelines that banned noncompliant banks from participating in any mergers, acquisitions or expansion projects."   That simply false.  Since 1977, the regulatory agencies have been required to consider an applicant bank's CRA record when it applies to merge or expand.  A negative CRA finding, however, did not preclude approval until the 1999 Gramm-Leach-Bliley Act.  The Times' 1995 reference must be to the CRA regulation promulgated that year, which did not change the law's effect on merger or expansion applications. Plus, quoting bankers as the defenders of the CRA was pretty lame.  Paper of record? We think not. But as we heard at an October 22 anti-police brutality march, "Don't complain about the media -- become your own media." Including where necessary and possible through Freedom of Information Act litigation!

October 18, 2004

  Predatory lending is going global, and methodically so.  Last week HSBC’s Stephen Green outlined the game plan. HSBC’s (Household’s) subprime focus will shift to Asia once it expands its business in Mexico and Brazil.  The Asian hit-list includes India, Malaysia, Singapore and Thailand. Green said HSBC is focusing on consumer finance because it is more profitable than some other areas of retail banking and added that HSBC is targeting Mexico and Brazil before Asia because it already has substantial operations there. "Some parts of the prime market are now highly commoditized in the U.S. and other countries, but once you move out of the highly commoditized products (and into consumer finance), you see a greater return," Green told DJNS on October 13. He estimated that five percent of the subprime market is predatory -- something we assume that U.S. legislators, if not regulators, will want to question him about. 

  While most CRA focus is on the FDIC, on October 15 the Federal Reserve approved Wachovia-SouthTrust, nose-counting the number of pro-bank commenters, and stating:

Several commenters also expressed concern that Wachovia and SouthTrust finance unaffiliated lenders who provide alternative products such as payday loans. Wachovia reviews loans to payday lenders, check cashing companies, and pawnshops; and it imposes increased documentation requirements, monitoring, and annual reviews of these loans to account for the potential increased risks, including legal and reputational risks, associated with these loans. Wachovia plays no role in the lending practices or credit review processes of these lenders.  [ICP] disagreed with a statement in the application that SouthTrust has a policy not to lend to payday lenders, pawnshops, and other ‘money service businesses’ (‘MSBs’). Wachovia acknowledged that SouthTrust has made several exceptions to this policy and, as a result, has ten loans outstanding to pawnshops or related entities worth $755,056, representing a de minimis portion of SouthTrust’s total loan portfolio.

 Question: so “de minimus” lying is okay with the Fed?   And those who gave in to Wachovia’s request for canned letters of support: do they also favor payday and predatory lending?   Just asking. On the fringe financial front, Cash America International Inc., the Fort Worth-based pawnshop operator and payday lender, announced with fanfare on October 12 that it will change its NY Stock Exchange  ticker symbol from PWN to CSH on Nov. 1. The company said the new symbol “better identifies the Cash America name and reflects changes in its business strategy from solely pawnshop operations to a multifaceted specialty finance business.”  More ways to screw you -- time for a new stock symbol...

  It must also be noted that the FDIC is out of control. Last week’s Connecticut Post quoted David Barr, a spokesman for the FDIC, that he “could not say when a final decision will be rendered, but anyone wishing to comment on the proposal must do so by Wednesday. The FDIC is considering raising the asset test level to $500 million or $1 billion... The act doesn't have much power, he added, because the only action the FDIC can take against a bank that is not investing in low-income areas is to give it a bad rating of either ‘out of compliance’ or ‘unsatisfactory.’ According to the FDIC, no bank in Connecticut has received either of these ratings during the last few years.”

  So let’s get this straight: the FDIC brags that CRA “doesn’t have much power” -- because the FDIC and the other three agencies have inflated the grades to entirely blunt their intended effects, both on mergers and as reiterated in the Gramm-Leach-Bliley Act.

 This same FDIC-er David Barr was quoted prejudging the comments and the outcome, in the Pittsburgh Tribune Review of October 14: "’People will say we're going back to the stone age, and banks will stop making loans in low- to moderate-income neighborhoods. But that's not true,’ said agency spokesman David Barr on Wednesday. ‘These changes would enable banks to decide what meets the needs of their communities, instead of some bureaucrat 2,000 miles away in Washington.’"

  Does Barr mean that only banks in the Mountain and Pacific Times Zones -- two thousand miles from Washington -- would be subject to the FDIC’s rule? More seriously, when the supposed bank regulators start portraying the regulatory process of bank examination as mere bureaucracy, what’s the next step: enabling banks to decide for themselves what sort of money laundering to stop, rather than submitting to some “bureaucrat 2,000 miles away”? 

 Speaking of money laundering, and regarding the $650 million found by U.S. military forces in Baghdad in hideaways of Iraqi dictator Saddam Hussein: investigators quickly learned through serial numbers that some of the freshly minted $100 bills came from UBS. Authorities later discovered phony records and a cover-up scheme by UBS officials in its main Zurich office, concealing up to $5 billion that was sent from UBS to Iran, Libya, Cuba and the former Yugoslavia from 1996 to 2003, when all those nations were under U.S. sanctions. At least eight shipments of U.S. cash had been sent by UBS through Iran and into Iraq. “While we will never know the full extent of the damage, we do know that our national security and economic interests were significantly compromised by these despicable acts," Senator Richard Shelby said -- not noting that his predecessor as chairman of the Senate banking committee, Phil Gramm, is ensconced at UBS...

October 11, 2004

The domination of the Office of the Comptroller of the Currency by large banks and the assessment fees they pay is made clear by documents Inner City Press obtained last week in response to a FOIA request made over five months ago.   The documents concern the application by HSBC to convert from a New York State charter to a national bank, to be regulated by (and to pay assessment fees to) the OCC.  HSBC began demanding free copies of certified approval documents even before the OCC ruled on the applications (or fully considered a CRA and predatory lending challenge ICP had timely filed).  

          On May 14, 2004, HSBC Household’s Martha Pampel wrote imperiously to OCC staff in New York: “I confirmed with our corporate secretary -- Upon OCC decision, which should be prior to July 1, we need get certified copies of decision document. I’ll have the estimated number of copies on Monday.”

   On May 18, OCC staff in New York wrote to the agency’s Communications Division in Washington: “It’s important that we meet the Bank’s timeframe on this. L[icensing] M[anager] DesSantos concurs with my recommendation to waive the fees. We anticipate approval of the mergers in the last week of June with consummation on July 1st.”

  To his credit, the head of the OCC’s Communications Division bristled at this: “I think this could be setting a dangerous precedent that might make other banks expect similar services or else they could suggest that we are playing favorites to big banks who are represented by former OCC employees.”

          As this question of waiving fees for HSBC moved up the chain, OCC New York staff explained on May 19: “We waived the fee for the field investigation. The costs of conducting the field investigation are probably higher than the cost of these certificates... I am trying to accommodate HSBC because timing can be an issue.”

   To this, the OCC’s Licensing Manager replied: “Yes, we did waive the filing fees and when you consider the fact that HSBC will probably pay around $9 million in assessments on an annual basis, I think waiving of fees is appropriate.”

     So much for the concern about the OCC being perceived to favor large bank.  The intra-agency comments make clear the lengths to which the OCC will go to “accommodate” large banks, to convince them to convert from state charters to the national bank charter.  We’ll expect the Conference of State Bank Supervisors (and its members, including the New York Banking Department) to chime in, and for those in Congress looking into the OCC’s preemption orders and charter sales to take a particular interest in this. Developing...

  In other OCC revolving door news, Ralph E. Sharpe has jumped ship to head the risk management and compliance team at Venable LLP's financial services group. So presumably he’ll be representing national banks before his old employer...

     Fed chairman Greenspan, in meeting on October 1 with select members of the Financial Roundtable, was face-to-face not only with bankers, but also predatory lenders. A representative of HSBC’s Household International, Siddharth “Call Me Bobby” Mehta, as well as longtime CitiFinancial executive Bob Willumstad. ICP’s timely comments to the Fed on Citigroup’s pending application to buy First American Bank include Mr. Willumstad’s response to ICP’s questions about CitiFinancial’s standards overseas. ICP has asked the Fed to nail this question down. If this wasn’t done, ex parte, on October 1, it’s time for the Fed to ask the question(s) in writing...

   Further note to the Fed, on HSBC: on October 8, HSBC claimed that it is beginning an internal investigation after a CIA report claimed Saddam Hussein had passed money through the bank's branch in Jordan to avoid United Nations trade sanctions. HSBC said that “the allegations, in this week's CIA report into the Ba'athist regime, had been a surprise. It said it was undertaking a hasty review of its Middle Eastern operations. The CIA report claimed that during Saddam's reign Iraqi agents used an HSBC account in Amman as a home for money which funded their operations. In a statement, the bank said: ‘Throughout the period of the Iraqi sanctions we were acutely conscious of allegations that they were being breached and, consequently, of the need for great vigilance.’” But that just makes the violation worse, and more telling....

     Could it be that the Fed has (another) conflict of interest, on pending applications by BNP, embroiled in the Iraqi Oil-for-Food scandal?  Last week a House subcommittee issued subpoenas to the Federal Reserve Bank of New York in the same scandal. The New York Fed manages the Development Fund for Iraq, an account in which Iraqi oil money and other funds earmarked for Iraq's reconstruction are held. The New York Fed held the account into which Iraq's oil revenues were transferred after Saddam's regime fell. The subcommittee hopes to use the FRBNY's account records as a window into the CPA's largely opaque management practices. At the underlying House hearing, BNP’s representative, in a crisp British accent, claimed that BNP “has had no discretion over how money has been spent or invested under the (oil-for-food) program."   It might be time for the Fed to suspend processing of not only PNC-Riggs, but also BNP Paribas’ applications...

  And now it can be told: payday lender County Bank, whose application to become a bank holding company was protested (much) earlier this year by ICP, declared in a terse September 30 letter: “CB Financial Corp hereby withdraws its application for Federal Reserve Board approval to become a bank holding company, filed on February 25, 2004.”  An interesting light is cast on the Delaware Bank Commissioner’s craven approval, back in June 2004...

October 4, 2004

   It had to be done, and now we’ve done it: on October 4, Inner City Press / Fair Finance Watch filed two 21-page comments opposing Citigroup’s applications to buy Texas’ First American Bank, with the Federal Reserve and OCC.  Beyond its ongoing predatory lending (of which mandatory arbitration is but the tip of the iceberg), Citigroup is embroiled in scandals all over the world now, including governmental findings of money laundering in Japan, bond trading scams in Europe, and a brewing SEC / NASDAQ enforcement action.  Too big to fail, too big to manage -- too big.  So why impose its practices on yet more consumers?

In analyzing Citigroup’s 2003 Home Mortgage Disclosure Act data, even ICP was surprised: Citi’s prime rate lenders have grown notably more disparate, from 2002 to 2003.  This despite the various partnerships Citigroup has announced.  The Emperor, it must be said, and said again, has no clothes. ICP's comments analyze Citigroup's mortgage lending in 2003, including in Texas; this analysis is followed, below as well, by descriptions of Citigroup's practices, including from testimony provided to ICP by whistleblowers inside CitiFinancial, evidence and questions about CitiFinancial’s high-rates overseas, and Citigroup’s investment bank’s support of predatory lenders, including Dollar Financial Group, a payday lender subject to class action suits.  Citigroup’s record in Texas, where it now seeks to expand by buying 100 branches, is particularly egregious. Its main prime lender there, CitiMortgage, in 2003 in the Houston MSA denied the conventional home purchase loan applications of Latinos SIX TIMES more frequently than applications from whites.  Citibank denied African Americans 3.22 times more frequently than whites.   This is worse than other lenders in this MSA: the denial rate disparities for the industry as a whole in 2003 were 2.17 for African Americans, 1.70 for Latinos (CitiMortgage’s disparity is over 3.5 times higher).

     Citigroup's higher-than-aggregate denial rate disparities are not explained by any greater-than-normal outreach with normal-priced credit to African Americans or Latinos.  In 2003 in this Houston MSA, CitiMortgage made 360 conventional home purchase loans to whites, only 48 to African Americans, and only 41 to Latinos.  By contrast, the aggregate industry in the Houston MSA in 2003 made 7441 such loans to African Americans, 15,317 to Latinos, and 40,885 to whites.   For these three groups, the aggregate made 11.7% of its loans to African Americans, and 24.1% to Latinos.  For CitiMortgage, the figures were notably lower, particularly for Latinos: 10.7% of loans to African Americans, and only 9.1% to Latinos (versus the aggregate’s 24%). 

In the Dallas MSA in 2003, CitiMortgage denied the conventional home purchase loan applications of Latinos OVER NINE TIMES more frequently than applications from whites.  Citibank denied African Americans 2.59 times more frequently than whites.  This is worse than other lenders in this MSA: the denial rate disparities for the industry as a whole in 2003 were 2.31 for African Americans, and 1.95 for Latinos (CitiMortgage’s denial rate disparity is over 4.6 times higher). Again, Citigroup's higher-than-aggregate denial rate disparities are not explained by any greater-than-normal outreach with normal-priced credit to African Americans or Latinos.  In 2003 in this Dallas MSA, CitiMortgage made 261 conventional home purchase loans to whites, only 13 to African Americans, and only 19 to Latinos.  By contrast, the aggregate industry in the Dallas MSA in 2003 made 4532 such loans to African Americans, 6790 to Latinos, and 44,015 to whites.  For these three groups, the aggregate made 8.2% of its loans to African Americans, and 12.3% to Latinos.  For CitiMortgage, the figures were notably lower: 4.4% of loans to African Americans, and only 6.5% to Latinos.  ICP’s comments note that Citigroup is already mis-serving Texas consumers, with over 90 high-rate CitiFinancial offices, and the headquarters of the controversial subprime lending operation that Citigroup bought along with Associates First Capital Corporation.

            ICP’s nationwide analysis of 2003 Home Mortgage Disclosure Act (HDMA) cumulates CitiMortgage and Citigroup's lead bank in the analyzed market, and calls the two together "Citibank.” In 2003 in the New York City Metropolitan Statistical Area (MSA), for conventional home purchase loans, Citibank denied loan applications from African Americans 5.79 times more frequently than applications from whites.  Citibank denied Latinos 4.54 times more frequently than whites.   These disparities are much worse than other lenders in this MSA in 2003, and even worse than Citigroup was in 2002 (disparity of 4.67 for African Americans, and 3.17 for Latinos).  The aggregate in 2003 in this MSA had denial rate disparities of 1.78 for African Americans, and 1.53 for Latinos.  Citigroup is both much worse than other lenders, and is getting worse, year-to-year.

     Citibank's higher-than-aggregate denial rate disparities are not explained by any greater-than-normal outreach with normal-priced credit to African Americans or Latinos.  In 2003 in this MSA, Citibank made 3873 conventional home purchase loans to whites (more than in 2002), only 432 to African Americans, and 450 to Latinos (fewer than in 2002).  By contrast, the aggregate industry in this MSA in 2003 made 7791 such loans to African Americans, 7516 to Latinos, and 37,998 to whites.  For these three groups, the aggregate made 14.6% of its loans to African Americans, and 14.1% to Latinos.   For Citibank, the figures were much lower: 9.1% of loans to African Americans, and 9.5% to Latinos (again, even lower than Citibank’s already disparate percentage in 2002). 

For refinance loans in the NYC MSA in 2003, Citibank denied applications from African Americans 4.07 times more frequently than applications from whites.  Citibank denied Latinos four times more frequently than whites (worse than its 2.73 disparity in 2002).  This is much worse than other lenders in this MSA in 2003: the comparable denial rate disparities for the industry as a whole in 2003 were 1.78 for African Americans, and 1.69 for Latinos. 

In 2003 in the Long Island MSA for conventional home purchase loans, Citibank (Citibank, N.A. and CitiMortgage together) denied loan applications from African Americans 3.12 times more frequently than applications from whites.  Citibank denied Latinos 3.15 times more frequently than whites.  This is much worse than other lenders in this MSA: the denial rate disparities for the industry as a whole in 2003 were 1.89 for African Americans, and 1.47 for Latinos.

In 2003 in the Chicago MSA for conventional home purchase loans, Citibank (Citibank FSB and CitiMortgage together) denied loan applications from African Americans 7.5 times more frequently than applications from whites.  Citibank denied Latinos 6.04 times more frequently than whites. These disparities are much worse than other lenders in this MSA in 2003, and even worse than Citigroup was in 2002 (disparity of 4.23 for African Americans, and 3.74 for Latinos).  The industry-as-a-whole in 2003 in this MSA had denial rate disparities of 3.08 for African Americans, and 2.36 for Latinos.  Citigroup is both much worse than other lenders, and is getting worse, year-to-year.

In 2003 in the Los Angeles MSA for conventional home purchase loans, Citibank (Citibank FSB and CitiMortgage together) denied loan applications from African Americans 2.78 times more frequently than applications from whites.  Citibank denied Latinos 3.74 times more frequently than whites.  This is much worse than other lenders in this MSA: the denial rate disparities for the industry as a whole in 2003 were 1.84 for African Americans, and 1.65 for Latinos.

In 2003 in the Washington DC MSA for conventional home purchase loans, Citibank (Citibank FSB and CitiMortgage together) denied loan applications from African Americans 5.44 times more frequently than applications from whites.  Citibank denied Latinos 5.63 times more frequently than whites (up from a 3.03 denial rate disparity in 2002).   This is much worse than other lenders in this MSA in 2003: the denial rate disparities for the industry as a whole were 2.84 for African Americans, and 2.35 for Latinos. For refinance loans in this MSA in 2002, Citibank denied applications from African Americans 5.22 times more frequently than applications from whites (up from a 4.38 disparity in 2002).

In 2003 in the Newark MSA for conventional home purchase loans, Citibank (Citibank FSB and CitiMortgage together) denied loan applications from African Americans SIX times more frequently than applications from whites.  Citibank denied Latinos a whopping ELEVEN times more frequently than whites.  This is much, much worse than other lenders in this MSA: the denial rate disparities for the industry as a whole in 2003 were 2.53 for African Americans, and 2.03 for Latinos. Citibank's higher-than-aggregate denial rate disparities are certainly not explained by any greater-than-normal outreach with normal-priced credit to African Americans or Latinos.  For these three groups, the aggregate made 11.7% of its loans to African Americans, and 12.8% to Latinos.   For Citibank, the figures were 7.9% of loans to African Americans, and only 5.7% to Latinos.  Citibank is a redliner; as also documented in ICP’s comment, CitiFinancial is a predatory lender....

 Meanwhile, continuing to hide even the list of payday lenders and pawnshops it funds.  Wachovia quietly disclosed in a September 27 SEC filing that it would close 175 to 200 branches within 15 months of consummating its SouthTrust proposal. Previously it had said -- including to the Federal Reserve and to the public, during the comment period - that   it would close 130 to 150 branches... ICP has also filed comments on HSBC, click here to view.

September 27, 2004

    ICP/Fair Finance Watch just filed comments based on the Senate Riggs Bank report’s findings regarding HSBC and Santander, click here for article in the Glasgow Herald, reporting that “A US-based human rights group has written to Britain's financial regulator urging it to halt Santander's £8bn acquisition of Abbey National until it fully investigates its part in the alleged "violation" of US money laundering laws.Inner City Press and its Fair Finance Watch, based in New York, has drawn the Financial Services Authority's attention to the US Senate's recent report on Riggs Bank's alleged money laundering for former Chilean dictator Augusto Pinochet, and the dictator of Equatorial Guinea;” click here for more.

   Sometimes the spin of the revolving door is revealing. Last week J.P. Morgan Chase, beyond Dina Dublon’s departure, hired Republican ex-Congressman Rick Lazio as its über-lobbyist, stating that Lazio’s experience in government would help the company develop "constructive dialogue with Congress and the executive branch.”  Translation?  J.P. Morgan Chase is betting on Bush. Why else does a bank hand its whole lobbying shop over to a Republican politician, just five weeks before the presidential election?

We’d be remiss not to note the publication of a much-needed, straight-forward book on predatory lending, Rich Lord’s “American Nightmare.”   In nine chapters and an appendix of questions that consumers should ask lenders, Lord surveys the field, from Pittsburgh to Wall Street, from brokers to services to lobbyists and beyond. Along the way he notes the work of non-profits in the trenches. From the Pittsburgh Community Reinvestment Group to Self-Help, from ACORN to Sunflower Community Action of Wichita, Lord profiles organizations and their campaigns. (A cynic might note that this is not a bad beginning of a marketing strategy, either.)  One critique -- because there must be at least one, right? -- is that punches get pulled. Lord shows, for example, that the two settlements of HSBC’s Household have not even slowed the company’s foreclosure rate.  Still the second settler, which last week praised CitiFinancial as well, is immune from Lord’s otherwise-trenchant analysis. (The same cynic might question whether this is a matter of politeness, or a marketing-related desire not to step on the toes of the field’s elephant.)   But that’s quibbling!  The book describes in novelistic detail the lives, both financial and emotional, of the people known as subprime. Here are two CitiFinancial victims:

“Mike and Ellen Papuga had tried for years to make a baby, but it just wasn’t happening... Then, in 1997, the apartment they were living in caught fire, and many of their belongings went up in smoke... The fire led to some financial and credit problems... So they went to CitiFinancial... The transaction reflected one of Sandy Weill’s mantras: cross-selling... In 2003, a miracle occurred: As her 40th birthday approached, Ellen became pregnant... They wondered why nobody at CitiFinancial had through to remind them of the [insurance] policy... Even though Triton is a Citigroup subsidiary, the collection staff claimed they had no information about the insurance policy.”

  And so it goes... Two points of full disclosure: ICP is covered in the book, including the questioning of Citigroup’s Robert Rubin, pages 106-7, and ongoing campaign against Citi’s and HSBC’s export of predatory lending, pages 59-62. Also, Lord reviewed Predatory Bender (click here for the review). Since he noted that book’s first edition’s typos, here’s a petty tit-for-tat: the executive director of CRA-NC is not Jeff but Peter.  Don’t rob Peter to pay... Jeff? Nor, we can’t resist, last week’s praiser of CitiFinancial. We recommend this book.

September 20, 2004

At press time we address in advance Citigroup’s expected announcement on Monday September 20 of unsurprising praise by (or purchasing of, as some wags put it) a nationwide organization, which has already delivered such praise to HSBC's Household (in a process that began in conjunction with HSBC's purchase of both Household and its critics -- click here for ICP’s reporting, and see below). Citigroup will be announcing a mortgage lending program related to immigration issues.  It might be fine product; it doesn’t change or mitigate the harm that CitiFinancial continues to cause in low-income communities of color, including those with significant immigrant populations... Even some of the settlement-professional who praised and/or participated in the Household settlement are expressing dismay, particularly at the group’s silence on Citigroup’s planned continued use of mandatory arbitration.  The group has criticized other lenders for using mandatory arbitration, in testimony to the House (“Lenders should not be curtailing borrowers’ access to appropriate legal remedies when the lender breaks the law”) and Senate, in its recent press release about a lawsuit; its putative head has said, in a prepared and still-up statement that "these mandatory arbitration clauses are meant to allow the company to escape the consequences of making illegal and abusive loans.”   Yeah, exactly -- including as to CitiFinancial... For a detailed description of Citigroup's practices, see Inner City Press' CitiWatch Report.

  Meanwhile, Inner City Press’ continuing review of the long-withheld documents released last week en masse by the Office of the Washington State Attorney General (after a series of court orders requiring the release) has revealed a telling timeline as Household moved toward the settlement that allowed its deal with HSBC.  On June 12, 2002, Kathy Mix of the AG’s Office wrote to staffer Paul Silver that Household had hired former state governor Booth Gardner “to assist them in the resolution of their problems... He met with Chris yesterday... Obviously, Chris has close ties to Governor Gardner, and we should view this as a positive development that will assist in resolution of the problems.” 

   That’s one view.  Booth Gardner substantially boosted Christine Gregoire’s career, to the point where now Ms. Gregoire is the Democratic Party’s nominee for governor.  For a company accused of predatory lending to hire the AG’s mentor and sponsor is a neat trick; if it’s a “positive development,” that’s mostly for the company itself.  Concretely, it bought Household the benefit of the doubt, less than two weeks later.  AG Gregoire held another meeting with Booth Gardner on June 20, 2002.   The following day, ex-Household employee Robert Segletes complained to the AG’s Office that

“A Household Executive and one of their lawyers called me today... [He] called my acts criminal and said, ‘Household could or could not be held liable and you could or could not be held liable for those actions.’... I found this very intimidating... I need an immediate answer as to my right and the intentions of the Attorney General.”

            The preamble above this e-mail, as it got circulated thought the AG’s Office, noted that “I don’t suppose it is a coincidence that this occurred the day following COG’s meeting with Booth Gardner.”  In fact it was forward directly to AG Christine Gregoire (to COG, that is), via her assistant Linda Fredericks.  Soon, however, other AGO staffers began to excuse the conduct of Household and its lawyer as a misunderstanding.  One staffer who didn’t, Paul Silver, would not long thereafter resign in the face of sexual harassment charges. See, e.g., Seattle Times of April 23, 2003, “Boss under fire quits but is rehired; Lawyer gets new state job despite report on complaints by women,” which recounts that

“The man who ran the state attorney general's consumer-protection division resigned from the department after being shown an investigative report detailing unsolicited hugs and kisses he gave women employees. But after leaving that position March 21, he was hired for a nonsupervisory assignment as assistant attorney general for the state investment board, which he started this week. Attorney General Christine Gregoire had been prepared to demand Paul Silver's resignation in late February if he had not offered it, said agency spokesman Fred Olson. ‘In light of the seriousness of the findings, I had no choice but to accept his resignation,’ Gregoire said last week.”

   Being quoted as being harsh on sexual harassment allegations is certainly wise, in the run-up to gubernatorial elections.   But no action was ever taken by AG Gregoire’s office about Household’s intimidation of witnesses, ex-employees and otherwise.   That one staffer apparently pressing for action to be taken was discredited by sexual harassment charges in indicative, at least, of a predatory lender benefiting for the AGO’s mismanagement.  Soon the deal would be cut. Household would be sold for $14 billion to HSBC, and its practices exported all over the world.  AG Gregoire would claim, on her Office’ website, that the settlement was limited by how much Household could pay, based on what an unnamed analyst had told her.  But after refusing to provide documents for twenty months, those provided now reflect no analyst to this effect, other than a Household official (or perhaps Booth Gardner).  Rather than providing answers, the documents raise more and more questions, that should be resolved soon.   Developing...

  Also, while the FDIC has extended to October 20 the comment period on its proposal to follow the Office of Thrift Supervision in exempting institutions with up to $1 billion in assets from normal CRA exams, ICP submitted its comments opposing the FDIC's plan, naming numerous banks which would benefit from the exemption which have weak (and worse) records. The FDIC's proposal is here; its press release solicitating comments is here

Predator in melt-down: last week we received the September 9 response by payday lender County Bank to the Federal Reserve’s questions of... July 2, 2004. When it takes you more than two months to answer simple questions, maybe you’re not ready to be a bank holding company, on that ground alone...

September 15-16, 2004

    Documents ordered to be released by Washington State judges, in response to Inner City Press' freedom of information request, reveal the limitations and flaws of the settlement agreement in principle HSBC's Household reached with the states just before selling itself to HSBC for $14 billion. The documents, still being reviewed, reveal a number of other not-acted-on Household practices: for example, "Household's contacting former employees who we are interviewing as witnesses... The witness reported to us that he was intimidated" (HFC-00758).

   Also, an e-mail recounting that "we have conducted a random verification of 300 consumers and 1000 responded saying they never received anything from Household... I'm guessing that this is similar to the situation Herscel ran into in the 11th hour of negotiations when he learned from the banking people that HH had not made good on their restitution promises from months before" (HFC-08608). There's a memorandum, marked (as aspiration, apparently) "Confidential Work Product," in which Phil Lehman of the North Carolina Attorney General's Office states that while "HH represents that the relief would amount to approximately $1600... the state-specific loan numbers provided to NC.. would yield about $300 per NC borrower." HFC-01308.

   One of the more comical exchanges follows a meeting in Chicago. Iowa's consumer protection guru (who's since left that Office) opines that "Beneficial was worse than Household with respect to mortgage lending practices... My assumption was that a) it was either Aldinger and the general shareholder capitalism syndrome that got them down this 'anything goes' road and/or b) HH decided to go with the Beneficial worldview when the two companies merged." Huey adds that Household's head of compliance, James Kauffman, "was invisible (except for the shiny cuff links on his French cuffs)." HFC-08748. A consumer advocate might wish that such pointedness was applied to Household's non-mortgage lending practices, the subject of most of the complaints received by the WA AGO...

   More substantively, after the agreement in principle, and after HSBC's deal announcement, a November 26, 2002 e-mail recounts that Household "did not agree to the 'present and future' subsidiaries language that the Multistate requested to assure that Household does not set up a new subsidiary to bypass the injunctive provisions." HFC-03018. A week later it's recounted that Tennessee officials "have an issue with the release of borrower claims. Seems they believe they do not have the authority to negotiate a release for a citizen of the state." HFC-03116. Ya don't say. Interesting, at the same time that Huey and others in the multi-state were telling ICP that the Agreement in Principle could not be changed, a November 19, 2002 e-mail from the Iowa AGO's Bill Brauch opined that "An AIP is just that, and it recognizes that details need to be filled in." There's competitive jockeying among the AGOs -- Paul Silver writes that he's "please to report that all parties, except the NY AGO, agree that the answer to the question regarding the number of angels that can dance on the head of a pin is: an infinite number. NY AGO maintains that the number is both finite and calculable. They are insisting that Household's obligation to do these calculations for us is implicit in the Agreement in Principle." HFC-05336. [Note: an informed source told ICP, at the time, that an 11th hour scandal emerged, in the NY AGO, regarding a number of loans that Household had not disclosed, beyond those alluded to above.] In other jockeying, when the MN AGO proposes getting more specific about those eligible for compensation, the response is that the MN AGO only got involved in the process late (August 2002), and therefore shouldn't break ranks.

   The TX AGO wrote that "We are still awaiting the results of our Consumer Credit Commissioner's talks with Household about the 'non-covered regulatory issues'" - presumably including Household's high-cost non-mortgage loans. We're still awaiting any results...

  Further examples, from among the thousands of pages delivered to ICP on September 15, include an e-mail from Washington's Department of Financial Institutions, recounting that someone

"asked why not all of the Household companies were included in the consent decree. Thinking he was speaking of Decision One, I asked him what company we had missed. He said, Beneficial Mortgage Corporation... I don't remember that name ever coming up in our negotiations. Do you think it's possible that we have a whole segment of loans that Household forgot about that would increase our borrower database? I wonder if we are getting numbers inclusive of those." (Doc. HFC-03173).

Earlier in this process, Inner City Press asked the Washington Attorney General's Office, in writing, other potentially-eligible Household customers which had been discovered." The WA AG's response, also in writing:

"You suggest I ask A[ssistant] A[ttorney] G[eneral David] Huey if he is aware of any responsive documents. He says that he is not aware of any documents responsive to that request."

Well, now that the courts have ordered documents disclosed, there turn out to be documents on this very issue. Other documents show the sloppiness of the "Multi-State Group," including inadvertently cc-ing strategy e-mails to Household's in-house counsel Kay Curtain (HFC-08674 and HFC-08693, in which a New York State official improperly cc's Household. This same New York officials told Inner City Press that the settlement only covered mortgage loans made through HFC and Beneficial Finance branch offices, because that was what the consumer complaints were about. But among the just-released documents is an e-mail from WA AGO's David Huey to Household Kay Curtain, stating that

"A review of our history with HFC indicates that the majority of the complaints we receive deal with products that are not the subject of our discussions, such as credit card issues or unsecured lending." HFC-00746.

If the majority of complaints concerned unsecured (that is, non-mortgage) loans and Household subprime credit cards, why were none of those issues addressed in the settlement? To stay Washington specific, the Q&A that AG Christine O. Gregoire (who's referred to in the intra-agency e-mails as "COG") put online stated

Question: "Why didn't you seek enough money from Household to fully compensate all harmed consumers?"

AG's Answer: "Our main concern was to provide as much compensation to consumers as possible. Analysts told us that the amount of money Household will be forced to pay still leaves the company financially stable so that they could actually comply with the settlement rather than become insolvent. If we had demanded too much, the company's financial stability could have been put at risk, which could have resulted in no consumer restitution whatsoever." (Emphasis added). <>

Early in the process, ICP specified in writing: "We are requesting all records reflecting the above-quoted, that '[a]nalysts told [your Office] that the amount of money Household will be forced to pay still leaves the company financially stable,' etc.".

From the documents reviewed so far, this statement appears to have been false. Or, the "analyst" on whom AG Gregoire and the Multi-State relied was a Household employee. There was a September 2002 letter to the Multi-State Working Group from Household's general counsel, stating that

"Numbers above the ones we offered could have a significant negative impact on our company. I cannot emphasize enough that our offer is consistent with the company's need to be able to continue to raise funds in the capital markets... We are Household are very concerned about announcements which could precipitate unintended consequences." HFC-02370

In this letter, Household's general counsel also used the FTC's capitulation to Citigroup as precedent:

"Particularly in light of the press reports the day after we recessed that the Federal Trade Commission is apparently going to settle its national dispute with Citigroup's Associates / CitiFinanicial unit for $200 million (with no mention of the near two score of substantive lending practices changes we have proposed), our offer which will cost us at least $370 million is substantial -- and fair. Therefore, despite the much lower Citigroup settlement for a much larger organization, we stand by our offer."

   We'd be remiss in this mid-week interim update not to mention the rumblings that Citigroup intends to announce, on Monday September 20, its praise by (or purchasing of, as some wags put it) a nationwide organization, which has already delivered such praise to Household (in a process that began in conjunction with HSBC's purchase of both Household and its critics). Even some of the settlement-professional who praised and/or participated in the Household settlement are expressing dismay at the slated announcement regarding Citigroup. For a detailed description of Citigroup's practices, see Inner City Press' CitiWatch Report. Developing...  Until next time, for or with more information, contact us.

September 13, 2004

Predators and fools: in the ongoing Freedom of Information litigation in Washington State, last week HSBC’s Household was again denied an emergency stay; the appeals court clarified that the order is effective immediately, and the documents must be produced. But late Friday afternoon, the Washington Attorney General’s office claimed that the documents have been mixed in with thousands of pages again, and even that other purported exemptions might apply.  (ICP heard this second-hard from AAG David Huey, who wrote to ICP back in December 2002 saying that delay harms consumers, and there was no need to expand the settlement to cover non-real estate and tax refund anticipation loans, in light of Household’s profitable sale to HSBC). The effect of this most recent delay may be to give Household yet another chance for a frivolous but time-wasting appeal.  We’ll find out next week, and report the results here.

Also on the predatory front, from the mailbag about AIG’s American General:

  Subj: Question about predatory lending by American General 

Date: 9/10/2004 11:23:35 PM Eastern Standard Time

From: [Name withheld in this format]

To: AIG-Watch [at]

 My mother has a loan from American General Financing in North Idaho and it is classic predatory lending... We also have the insurance from them with her 23% interest loan. In fact there are two and one has a $720.00 check with a poorly forged signature. She didn't even know about it until last week when I made her get copies of her loan with her signature on them. AG had only given her a few of her loan papers and none with the check or stating that she had two insurance polices from them until we demanded these copies. An attorney has agreed to look at her loan next week but AG has told her they are going to take her home and her vehicle (used on the loan) by the end of the month. Any advise or help you can offer will be a huge blessing. We are a little lost in all of this.   Thank you for your site [etc.]

   At the cusp of money laundering and redlining, Riggs and PNC are policing the press, keeping things quiet, hoping it blows over.  For example, following a report of ICP’s challenge in the National Mortgage News, the NMN ran a demanded correction on September 6:

In the Aug. 30 issue of NMN regarding the Inner City Press/Fair Finance Watch challenge to the proposed acquisition of Riggs National Corp. by PNC Financial Services Group, Riggs was incorrectly described as having been charged with accounting fraud. The company has never been charged with this or any other violation. We regret the error.

This seemed too craven; ICP wrote in:

   Your Sept. 6 retraction, in the face of PNC's complaints, of your August 30 mis-report that Riggs Bank was "not long ago was charged with accounting fraud" should have said more -- it was PNC that was charged with accounting fraud, and paid $115 million to settle the charges.   On Sept. 6, you stated, "Riggs was incorrectly described as having been charged with accounting fraud. The company has never been charged with this or any other violation."  That too is incorrect. Riggs has been charged with money laundering, and the investigation remains ongoing, by the U.S. Attorney in the District of Columbia, and in the U.S. Senate, including on the question of whether Riggs' greed assisted in money laundering for terrorism.  See
  We like it when publications are willing to correct themselves -- but you shouldn't give in so easily to large banks' complaints, without pointing out what the basis of the report was. 

  So far there has been no response; developing.

            A follow-up to last week’s report on Royal Bank of Scotland’s stealth moves for preemption: now they’ve applied to create and acquire a new national bank in Connecticut. The Federal Reserve’s H2A includes an application for “RBS National Bank, Bridgeport, Connecticut, a de novo bank”...

September 6, 2004

   The issue of big banks' support of payday lenders, pawnshops and the like continues to develop. Last week, ICP received from Wachovia a copy of its August 27 response to the Federal Reserve's questions of August 19, including on issues ICP has timely and repeatedly raised. The Fed's August 19 question 3, for example, notes as ICP has that

"Exhibit 6 of the application says that it is SouthTrust's policy not to lend to pawn shops, payday lenders, check cashing companies, or similar companies. Indicate how long this policy has been in effect. Also indicate whether SouthTrust or any of its subsidiaries, including SouthTrust Bank and any of its predecessor depository institutions, has made loans to such companies that are still help by SouthTrust or SouthTrust Bank, and whether these loans (if any) were made before or after implementation of SouthTrust's policy. If they were made after implementation of the policy, please explain why."

   The banks' August 27 response, at least as provided to ICP, is non-responsive. While claiming that "SouthTrust's policy not to lend to pawn shops, payday lenders, etc., has been in effect for over five years," since "March 31, 1999," ICP has shown numerous loans to just such businesses, by SouthTrust, well after March 31, 1999." The FRB's question explicitly asks, if the loans "were made after implementation of the policy, please explain why." But as provided to ICP, no attempted explanation is even offered. There is an off-handed reference to "Confidential Exhibit 6," and to five other withheld exhibits, all of which ICP hereby requests, both under the FRB's rules prohibiting ex parte communications, and under FOIA. The statement that such loans represent only a small percentage of SouthTrust's business, even if true, only undermines the claim of competitive harm on which a request for confidential treatment would have to rest. The information must be released, the comment period should be extended, and the requested hearing held.

   ICP also contests Wachovia's response to FRB August 19 question 1, in which Wachovia states that it "does not have any ownership interest in a subprime lending entity." As you know, Wachovia (First Union) bought The Money Store, and continues to be "engaged in subprime (or near-prime) lending" activities through HomEq.

   ICP notes the banks' response that "SouthTrust Mortgage Corporation originates loans from a wholesale channel referred to as EquiBanc Mortgage Corporation" -- a subprime lender whose "compensation to brokers is in the form of yield spread premium." Great...

   Also, the Huntington-Unizan fight, which began back in the Spring, has developed. Way back on July 1, ICP contested Huntington's attempt to withhold its response to the FRB's questions about what due diligence it performs in connection with its business dealings with payday lenders, pawnshops and other nontraditional providers of financial services. On September 1, after delay occasioned by Huntington, a portion of "Confidential Exhibit B" was released. The document Huntington was trying to withhold states, in part:

"Huntington does not conduct due diligence concerning [a provider of non-traditional bank products which Huntington construes as] a depositor's compliance with fair lending and consumer protection laws, require representations and warranties in its deposit agreement to that effect, require agreements other than those required to establish cash management services of monitor fair lending and consumer protection compliance."

  That is, Huntington does not even pretend to do any due diligence when providing cash management services to payday lenders and other fringe financiers. Even where Huntington lends to such businesses, it admits (in the long-withheld document) that it "does not typically monitor the borrower for ongoing compliance with law."

  As simply one example, Huntington's larger peer SunTrust has recently informed the FRB that it will cease lending to payday lenders and car title lenders, in light of consumer harm and reputational harm. (Click here for more.) Huntington is so blind, or blithe, regarding even reputational harm that it does no due diligence (see supra) and no ongoing monitoring. Huntington's admission militates for the hearings ICP has requested, and for denial of the application (as does the ongoing SEC investigation into Huntington's accounting irregularities, etc.). Developing...

   Annals of preemption: ICP's review of the list of applications pending before the FDIC finds a series of applications including Charter One Bank, National Association and Citizens' FDIC-supervised state banks in PA, MA, CT, etc.. Apparently RBS' Citizens is moving toward an OCC charter and preemption of all states' consumer protection laws, something for which HSBC, Morgan Chase and other have been criticized. But as usually with RBS Citizens, it's being done stealthly -- sneakily, one might even say... Like the 900 layoffs, 400 of them in Cleveland, another 400 in Rochester, and 75 in Albany. Great effect on New York, no? In Cleveland, RBS Citizens hit-man Hollister is claiming that mayor Jane Campbell "misunderstood" him, about the full scope of layoffs. BofA in Boston gets skewered for such miscommunications; RBS Citizens dodges the bullet -- for now...

What's in a name? Citigroup's new purchase on Puerto Rico, a subprime lender, is named "Easy Money." It comes with six offices, to add to the six branches from which CitiFinancial is already robbing people on La Isla del Encanto; CitiFinancial plans to open three more this year, and ten in 2005... Sin verguenza is the word: shameless.

August 30, 2004

  On the day this is published, banks are feting those who write the banking laws: in the Rainbow Room of Rockefeller Center on the evening on August 30, it's the so-called 2004 salute to the House Financial Services Committee. There will be outdated songs by Christopher Cross (still lost "between the moon and New York City"); there will be shameless sucking-up for further deregulation.

   In the midst of Republican National Convention madness, we were glad to see the (Republican) Lt. Governor of Massachusetts cancel her appearance at a Bank of America-sponsored breakfast, in response to BofA's massive (and not fully disclosed) layoffs in the Bay State. The hearings of BofA - Fleet in Congress, slated for November or at latest December, should be interesting... Before that, in no particular order, there's a hearing on car title lending by the Tennessee General Assembly, slated for Memphis on September 10; and the (Clinton-ite) CEO of Advance America, Billy Webster, has been subpoenaed to appear at a hearing on payday lending and usury in North Carolina on October 5...

   Kerry's pronouncements from a high school in Daly City, California on August 27 were a good start. The American Banker newspaper quotes various industry spokespeople as angry at the plan -- which is good. ICP was partially quoted, that predatory lending should be solved, not just used as a campaign issue every four years: "we have to hold the Democrats to account, too. ... Follow-up is everything." Left out of the quote was the specifics: while it is widely reported that if elected, Kerry would ask Citigroup's Robert Rubin to replace Alan Greenspan, the reality is that Rubin being at Citi has done nothing to clean up CitiFinancial.

  This is true despite the fact that at Citigroup, there's no wall between banking and predatory lending. And the whole team gets involved. For example, on Citi's Texas deal last week, the press release quote from the Bob Willumstad; Marge Magner spun the FT, and another a main spokesman was Ajay Banga, previous spinner for CitiFinancial (now that job's gone to an just-retired reporter, Rob Julavits, see below). Banga, who admitted that CitiFinancial sold insurance on fishing rods on which it never foreclosed, told the American Banker that "We don't have to be in every state, but we do have to be in the more critical ones." The deal is scheduled to be completed in the first quarter, after which Citi would build more branches in Texas or seek further acquisitions, Banga told the American Banker -- which misreported that "Dallas is the headquarters of the consumer finance business, CitiFinancial." Uh, that'd be Baltimore, to which Sandy, Bob W, Marge M. and even Jaime went in the Eighties, and cut a Faustian deal... Thought CitiFinancial did announce some 116 layoffs in Hanover, Maryland last week, while keeping its skeezy subsidiary Chesapeake Appraisal and Settlement Services in Columbia, MD... The spokesman for this layoff announcement? Ex-American Banker reporter Robert Julavits. "It is an effort to maximize efficiencies and leverage our resources in technology," said spokesman Robert Julavits. There ought to be anti-revolving door provisions between industry and the supposedly independent press, as well.. An anecdote: when CitiFinancial was acquiring Washington Mutual Finance Group, but leaving behind its Mississippi offices, ICP explained the scam to Mr. Julavits, and to reporters in Seattle. The latter covered the scam, but Robby the J didn't. And now...

   HSBC, continuing to abuse the process, has submitted yet another appeal of its most recent loss in attempting to keep secret information about Household's lending practices. On August 26, HSBC filed a "Motion to Modify Commissioner's Ruling Denying Emergency Stay." There's really no new arguments, beyond the one's already deemed meritless by the court. But HSBC's goal is to increase the costs of anyone seeking to learn about Household's practices. For shame...

  Sleazy JP Morgan Chase in Ohio: the Olentangy Local School District might have to pay nearly $1 million to Bank One if state tax officials approve the company's tax-refund request. 'Obviously this is a dramatic hit to the Olentangy school district,' said Delaware County Auditor Todd Hanks. The Ohio Department of Taxation notified the county on Aug. 12 that J.P. Morgan Chase submitted a refund request for $1.14 million in personal-property taxes paid to the county as part of Bank One's 2002 tax bill. Of that amount, between $800,000 and $900,000 would come from the school district, said district Treasurer Andy Geistfeld. The rest would be owed by the county. 'We just passed a levy and budgeted for the next three years and it was already going to be a tight three years,' Geistfeld said. With the interest already accrued on the principal, Hanks said, the total refund that the district might have to pay is already more than $900,000. By the time the case is decided by the state, the sum owed could exceed $1 million. The personal-property taxes in question apply to Bank One's 2-million-square-foot Polaris operations center. The site is headquarters for Bank One's retail banking operation and its investment subsidiary, Banc One Investment Advisors. Bumbling JPM Chase spokesman Jeff Lyttle said the tax refund is being sought because an internal audit revealed the company paid personal-property taxes on assets in 2002 that 'had been disposed of and did not in fact exist at that time.' Bank One officials had told the Delaware County auditor's office in late 2003 there was a possibility the company would seek a refund, Lyttle claimed. He's the one who admitted that JPM Chase will fund anything that's not technically illegal, including payday lenders whatever their record... 

August 23, 2004

  On Riggs-PNC, the plot has thickened -- the Washington Post of August 21 reports on the widening criminal investigation of Riggs. CBS MarketWatch, which covered ICP's filing last week, now notes that "a lengthy probe could affect the company's pending acquisition by PNC." Another conflict has been identified, and raised: PNC awarded $50,000 to the Fed chairman's wife in April 2004. With all due respect, click here to view a summary of ICP's second comment, a petition for recusal.

  Now, it’s time to examine which banks are paying for the Republican National Convention, and what they’re getting in return. Directly on CRA, the FDIC’s fast-called meeting last week to propose raising the "small bank" threshold to $1 billion is one example; the OTS turning from low- and moderate-income lending to disaster relief is another. The OCC’s mass-preemption of consumer protection laws, and the Fed’s mega-merger approvals by notational voting (and ongoing conflicts of interest -- click here for more) complete a tour of the regulatory quartet. It’s pay-to-play: financial services firms have hit the top-ten in terms of contributing (or bribe-paying) industries, up from 17th in 2002. Of course, in the we-are-shocked Casablanca (White House) world of McCain-Feingold, it’s supposedly not the corporations which are giving money, but only their employees, through corporate PAC and as bundled by their CEOs.

  Take, for example, the CEO of Wachovia, Ken Thompson. He has bundled more than $200,000 for the Bush campaign, making him like Bank of America’s vice chairman Jim Hance a so-called "ranger." (Those bundling over $50,000 are merely "mavericks;" over $100,000 and you’re a "pioneer"). Wachovia also funds high-cost payday lenders, and is applying to the Federal Reserve for regulatory approval to buy SouthTrust, which counter-factually denies that it funds payday lenders and pawnshops (click here for Inner City Press’ proof).

   While corporations can’t directly fund the campaigns, they’re free to pay for the conventions and the parties. Who’s paying for the RNC? The list includes AIG (regarding which, see Mailbag below in this Report), BofA, Bank of New York, Citigroup, Deutsche Bank, JP Morgan Chase, Merrill Lynch, New York Life, State Street and others.

   Several of these, including Citigroup and Bank of America, are also top donors to the Democrats: they are amoral, or meta-political, desiring access whoever wins. BofA, fresh for dissembling about its major Fleet Bank layoffs, will be the principal sponsor of a so-called salsa party on August 31 at Rockefeller Center. There’s talk of a protest of the other sponsor, for supporting policies that undermine Latinos well-being the length of the continent. Another more stealth connection: on the boards of directors of both Halliburton and Deutsche Bank is one W.R. Howell, not of Gilligan’s Island but J.C. Penney, per .. We’ll see. Seen at the DNC in Boston was Citigroup’s Robert Rubin, strategically placed in the quasi-royal box to ensure "chatter" (to use a word that’s that lately been shifted from Al Qaeda to demonstrators, see below) that Rubin might, just might, become the chairman of the Federal Reserve if the Democrats win. So either way, bankers will rule. Surprised? We aren’t. We’re just outraged... In further even-handed news, payday lender Advance America, run by ex-Clinton scheduler Billy Webster, is preparing $340 billion predators’ initial public offering, according to a recent SEC filing. Ah, the Democratization of capital..

    And its globalization, including by HSBC: in its attempt to keep secret documents that even the Washington State Attorney General now wants to release, HSBC's Household suffered another defeat last week. Household was denied a preliminary injunction; now it's been denied a stay pending appeal (though this decision is stayed until August 26). From the August 18, 2004, Commissioner’s Ruling Denying Stay in Household v. Gregoire, Court of Appeals for the State of Washington, Division One, No. 54722-4-I --

"In January, 2003, Inner City Press of New York made a public records request of the Washington Attorney General’s office seeking documents related to the December, 2002 settlement agreement with Household. The Attorney General notified Inner City on a monthly basis that its review of the documents was continuing, but few documents were released. In March, 2004, the Attorney General notified Household of the records request. The Attorney General later notified Household that the settlement-related documents would be released on June 21, 2004. The Superior Court granted Household a temporary restraining order enjoining the release of the documents. The court also granted motions to intervene by Inner City Press, the Bellingham Herald, and the Seattle Times. The court later denied Household’s request for a preliminary injunction, dissolved the TRO, and ordered that the records be released by August 19, 2004. Household appealed. This motion for a stay pending appeal followed...

"Household’s emphasis on the importance of the settlement to the Consumer Protection Division’s operations underscores the public interest in access to the records at issue here. If settlement records were perpetually exempt from disclosure, the public would have little ability to monitor the effectiveness and policy choices of the Consumer Protection Division since 95 percent of the agency’s investigations result in settlement...

"Thus, even though denial of a stay will deny Household the fruits of its appeal, I conclude that Household has failed to demonstrate that its likelihood of success on the appeal justifies delaying disclosure of these documents for the six to 18 months the appellate litigation is likely to require. I am, however, mindful of the fact that Household has the right to seek review of this order by a panel of three judges. While I am denying an appellate stay, I will stay the effect of this order until August 26, 2004 to allow Household to move to modify this decision on an emergency basis."

   Court Commissioner Susan J. Craighead

   If its abusive use of money and endless lawyering to keep secrets is any predictor, HSBC's Household may well request reconsideration by a three judge panel, and ask for yet another stay. Developing...  Finally, for now, a sample from the AIG / American General mailbag:

Update of August 23, 2004: From the mailbag:

Subj: American General Finance Insurance Problem

Date: 8/15/2004 10:54:15 PM Eastern Standard Time


To: AIG-Watch [at]

Hello! I have had loans with American General Finance since 1998. My car had been the collateral. I was in severe financial straits due to a failing business, and I accepted three offers to refinance my loan (each adding at least $300 in fees alone to the amount of the loan, practice I understand is called "loan flipping"). I admit to lacking financial sophistication. However, before accepting the third and final refinancing I expressed concern that the amount of the loan might then exceed the value of the car, hence if I were in an accident and totaled my car the insurance would not cover it. I was assured at that time that the insurance would indeed cover the amount of the loan. I accepted this statement based on trust. In February 2003 my car was indeed totaled, and at that time my coverage was the insurance supplied by American General. It in fact did not cover the loan; in fact, the insurance only covered approximately $3200, leaving a balance of approximately $5800. Since I needed a car for my work, I had no choice but to buy a replacement car, and it became difficult to carry both payments. Now, I am being sued by American General for the balance of the loan at $5500... The contract I signed allows for damages not exceeding $5000, including attorneys fees and all costs, but they are suing me for $5500...

  That’s an extra $500 for the RNC...

August 16, 2004

   Inner City Press' Fair Finance Watch has just filed two 28-page challenges to applications by the PNC Financial Services Group to acquire the scandal-plagued Riggs National Corporation, with the Federal Reserve and OCC. ICP's comments include evidence that PNC funds payday lenders such as Check n’ Go of Washington DC, Inc. and elsewhere; ICP contrasts this with PNC’s peer SunTrust’s July 12, 2004 response to ICP’s comments, that SunTrust will no longer fund payday lenders. See, e.g., "SunTrust pledges to drop ties to payday & title lenders,"   and here.

  ICP’s comments use recently-released 2003 mortgage lending data to demonstrate that PNC disproportionately excludes African American and Latino applicants from its lending. However, ICP’s comments first emphasize that the fast sell-off of Riggs may undermine the ongoing credible investigation that the Administration has promised -- particularly a sell-off to PNC, which beyond relining and funding payday lending was not long ago charged with accounting fraud, and subject to a deferred prosecution agreement with the U.S. Department of Justice.

   Riggs is essentially a crime scene -- it shouldn't be sold so quickly, least of all to an unqualified bank like PNC, which we have now proved funds high cost payday lenders like Check n' Go. Riggs trampled human rights abroad, while PNC supports predatory lending throughout the United States. This is a shotgun marriage made in hell, one that we are speaking up to oppose, showing why these two banks should not be joined together, neither now nor in the future.

ICP's comments analyze PNC's recently-released 2003 Home Mortgage Disclosure Act (HMDA) data, and demonstrate for example that in the Newark, NJ Metropolitan Statistical Area (MSA), for conventional home purchase loans, PNC Bank N.A. in 2003 denied loan applications from Latinos 4.71 times more frequently than applications from whites. PNC’s disparity for African Americans was incalculable in 2003: PNC made no conventional home purchase loans to African Americans in 2003 in the MSA of Newark, NJ.

  PNC claims to make up for its lack of home purchase lending to people of color with its home improvement lending. But in the Newark MSA in 2003 for this type of loan, PNC Bank N.A. denied the applications of Latinos 3.16 times more frequently than whites, and denied African Americans 2.84 times more frequently than whites.

  In its home MSA of Pittsburgh, PNC Bank NA in 2003 denied the conventional home purchase applications of African Americans 4.62 times more frequently than those of whites. Again, PNC’s lack of home purchase lending to people of color was not made up for its home improvement lending: in the Pittsburgh MSA in 2003 for this type of loan, PNC Bank N.A. denied the applications of Latinos 2.11 times more frequently than whites, and denied African Americans 2.43 times more frequently than whites.

  PNC Bank N.A. has 100% denial rates for African Americans’ applications for home improvement loans in the Jersey City NJ and Newburg, New York MSAs in 2003. It was scarcely better in its home state of Pennsylvania. In the state capital, the Harrisburg MSA, PNC Bank N.A. for home improvement loans denied the applications of Latinos 3.28 times more frequently than whites, and denied the applications of African Americans 2.93 times more frequently than whites. In the Philadelphia MSA, for refinance loans, PNC Bank N.A. denied the applications of Latinos 2.45 times more frequently than whites, and denied the applications of African Americans 2.64 times more frequently than whites. In this Philadelphia MSA for home improvement loans, PNC Bank N.A. denied the applications of Latinos 2.72 times more frequently than whites, and denied the applications of African Americans 3.06 times more frequently than whites.

  PNC's other bank, PNC Bank Delaware, in 2003 in the Wilmington DE MSA for conventional home purchase loans denied 100% of the loan applications it received from Latinos. For refinance loans in this MSA, PNC Bank Delaware denied the applications of Latinos 2.93 times more frequently than whites, and denied the applications of African Americans 2.02 times more frequently than whites. For home improvement loans in this MSA, PNC Bank Delaware denied the applications of Latinos 2.73 times more frequently than whites, and denied the applications of African Americans 2.22 times more frequently than whites.

  ICP's comments state that, given these lending disparities, on this ground alone the public would be ill-served by allowing PNC to acquire Riggs and its branches. Also to be considered, including at the requested hearing, is the question of reductions in service, which occurred, including via branch closings, after PNC - United. The Washington Post of July 26, 2004, reported: "Brian Goerke, a spokesman for PNC, said the company will initially operate all 51 Riggs branches. Long-term decisions about historic structures such as the Corcoran branch... have not been made, he said." The American Banker newspaper of July 19, 2004, reported that "executives indicated that about 50% of Riggs' 1,400 employees would be cut." Staff cuts of 50% would be inconsistent with consumer service, and make a troubling contrast to the windfall expected by those responsible for Riggs' practices. The Washington Post of August 13, 2004 reports that ""Robert L. Allbritton is slated to received $850,000... Nine other executive officers will receive a total of $4 million." ICP has requesting public hearings on this ground and especially on PNC's funding of problematic payday lenders. As documented by the Uniform Commercial Code filings ICP has obtained and submitted, PNC funds and enables for example:

Check n’ Go of Washington D.C., Inc. (proved by a UCC filing from the District of Columbia Department of Finance and Revenue); Check-N-Go of Illinois; Check n’ Go of Ohio; Check n’ Go of Washington (State); Check n’ Go of Wisconsin; "The 409 Group" care of Check n’ Go’s parent CNG Financial Corp. in Mason, Ohio, etc..

   PNC has presumptively been on notice of predatory lending issues surrounding Check n’ Go, including because Check n’ Go has been under fire in PNC’s headquarters city, Pittsburgh. See, e.g., Pittsburgh Post-Gazette of May 14, 2004, "Zoning for ‘Payday" Loan Shops Opposed" --

"Several community groups are fighting to keep payday loan outlets out of commercial districts on the North Side and in East Liberty, claiming the businesses will have a negative impact on redevelopment efforts and exploit people who can least afford to pay the loans back... The businesses are being proposed by Check 'n Go, an Ohio-based company that currently operates 25 outlets in Pennsylvania. Check 'n Go offers short-term loans, typically in the form of paycheck advances, to customers... [The] director of real estate development for East Liberty Development Inc., decried the ‘exploitative nature’ of the businesses, saying they... tarnish ‘people's financial behavior.’" (Emphasis added).

   This is in PNC's headquarters city, one that it claims to serve under the Community Reinvestment Act. See, e.g., Bergen Record of October 15, 2003, "Group seeks to block PNC deal for N.J. bank," reporting that "Brian Goerke, spokesman for PNC, declined to respond to specific allegations. He said the company is proud of an 'ongoing commitment to improving all the communities in which we do business.' The company 'will respond appropriately with any matters raised' during the acquisition approval process, he added."

    PNC's funding and enabling payday lenders is hardly indicative of an "ongoing commitment to improving all the communities in which we do business." Also, ICP’s own recent research finds for example that Riggs served -- or serves -- as correspondent for, among others, Bank of Sierra Leone, Sierra Leone Commercial Bank Ltd, Energobank of Bishkek, Kyrgyzstan, Banco de Cabo Verde, Banco Internacional SA, and others - evidence has been submitted. ICP has formally requested hearings. Click here for a summary of ICP's PNC - Riggs comments; click here for an update on Wachovia-SouthTrust, and their, uh, misstatements about SouthTrust not funding fringe financiers...

  Finally, for this Report, under the heading subprime will take you everywhere: in Taipei, Taiwan, on August 30 Citigroup "will celebrate four decades of island banking with a reception at the Grand Hotel. Company dignitaries who will be there include Marge Magner, Chairman & CEO of the Global Consumer Group" -- previously, trainer of CitiFinancial subprime branch managers at the Baltimore "campus," where her speech droned on through a World Series baseball game, which many (still, and gone) branch managers still groan about... But in Taipei, "there will be entertainment from well-known singer Tsai Chin who will sing hits from the 60s to 90s, a lion dance and other cultural events and a slide show and photo exhibit along with speeches." (Quotes are from the China Post of August 13). Ah, Citigroup...  

August 9, 2004

  On Friday afternoon, Wachovia finally attempted to explain away the lie in its SouthTrust application, that "It is SouthTrust’s policy not to lend to pawn shops, pay day lenders, check cashing companies or other MSBs." ICP’s July 26 Comment identified a number of Uniform Commercial Code filings showing SouthTrust making just such loans. On August 6, Wachovia submitted a five-page letter to the Fed, purporting to respond to ICP's comments, which on this issue stated:

"Of the 15 SouthTrust relationships cited by ICP, four loans have been paid out and a loan relationship no longer exists.  Two other UCC filings reflect loans to parties for which the businesses in question served solely as collateral. Four other entities cited are not pawnshops or money service businesses or provide MSB services only as an incidental service.  Five such relationships do exist with pawnshops and were made as exceptions to SouthTrust's policy. In addition to those five relationships, we have identified five other credit relationships with pawnshops or related entities, some of which were acquired through mergers with other institutions... Moreover, it is standard industry practice to allow exceptions to credit policies based on legitimate reason."

  But what are those reasons? Given the specious reasoning Wachovia’s response attempts to use to explain the counter-factual statement in Exhibit 6 of the Application, ICP in its August 9 Comment has specifically requested that, in light of Wachovia's above-quoted statement about exceptions to policy, its earlier statement, also in Exhibit 6, that "It is Wachovia's policy not to originate sub-prime loans" be more closely scrutinized, including at the requested hearings.

   The day prior to its August 6 submission attempting to explain or clarify the counter-factual statement that "It is SouthTrust’s policy not to lend to pawn shops, pay day lenders, check cashing companies or other MSBs," the two banks issued a press release and 20-page brochure about a "community commitment." Ironically, the brochure states that "To fight unfair or predatory lending practices, we will: Provide national leadership in ending predatory lending practices by working with lenders, advocates, bank regulators and government officials to protect consumers. Continue national leadership in financial services fair lending best practices through training and speaking at prominent conferences." But the above, and continued lending by Wachovia to payday lenders, the identities of which Wachovia is seeking to withhold (ICP awaits FOIA response), is inconsistent with this claim.

  As correctly noted in the Norfolk Virginian-Pilot of August 6, 2004, it wasn't even "clear whether the $75 billion of designated lending would surpass the amounts that Wachovia and SouthTrust would have lent over the next five years had they not agreed to merge... [ICP] contends that the two banks have provided loans to lenders that prey on vulnerable consumers, such as payday lenders, car-title lenders and check-cashing companies. Despite the dollar amounts involved, Wachovia’s pledge... doesn’t address those concerns from [ICP]."

   Wachovia's Response admits, as it must, that its "approval rate for African American / Black applicants in the Jacksonville FL MSA is lower than the aggregate peer rate," and that the same is true for Latinos / Hispanics in the Washington DC MSA (Resp. at 3). Its admission regarding the Columbus, Georgia market is more indirect, claiming only that ICP’s "assertions fail to fully reflect Wachovia’s overall success in the Georgia market;" it tries to explain away its Philadelphia disparities by reference to "greater-than-normal outreach." Note that Wachovia Bank's denial rate for African Americans' application for conventional home purchase loans was higher in 2003 (in the just-released data) than for Wachovia in 2002. ICP reiterates its request for public hearings.

  While awaiting receipt of HSBC Household's long-shot appeal in Washington State to block release of information, on August 5 oral argument was held in federal court in Wilmington, Delaware on ICP's ongoing request for the Delaware AG's documents about HSBC Household's predatory lending and settlement, and the Constitutionality of Delaware's FOIA. See "Federal Judge Weighs Delaware Records Law: Residency Requirement Is Unconstitutional, Complainant Asserts," by Mary Allen, Wilmington (Del.) News-Journal, August 6, 2004.

August 2, 2004

   The issue of banks funding payday and car title lenders, pawnshops and other fringe financiers, is picking up here. Here's from a July 30 editorial in the Orlando Sentinel, "SunTrust was Right to End Business with Payday and Car Title Lenders" -- "SunTrust made its decision to cut ties with such lenders after a consumer group filed a complaint with the Federal Reserve opposing the bank's pending merger with National Financial Corp. of Memphis, Tenn. Among other complaints, Inner City Press/Fair Finance Watch said records showed SunTrust had at least 60 customers making payday or car-title loans. Announcing its decision, SunTrust cited the ‘potential reputational risks and consumer harm’ that could come from lending to such companies. How candid, and how refreshing. ICP believes SunTrust's decision could persuade other banks -- especially those seeking government approval for mergers -- to follow suit. Let's hope so." Thanks, Orlando Sentinel. The last reference in the editorial is plainly to the proposed takeover of SouthTrust by Wachovia, whose lead bank, OCC-regulated Wachovia National Bank, funds a range of fringe financiers (as does SouthTrust, despite its denials). But last week, Senator Chuck Schumer praised the OCC for having cracked down on links between banks and payday lenders. Schumer said that on this, the OCC has "done the right thing. So let's give credit where credit is due." It’s nice (and good politics) to appear to be even-handed. But the OCC allows Wachovia National Bank, among others (including Bank One and its soon-to-be national bank parent, JPM Chase), to lend to fringe financiers. So where’s the beef?

   Here also is an editorial in the Memphis Commercial Appeal of July 31:

"National Commerce Financial Corp. and SunTrust Banks recently decided to stop doing business with companies that provide payday or car title loans. The move, while commendable, appears to have been done to win favor with federal regulators who will decide whether to approve a merger between NCF and SunTrust. Whatever the motives, the decision shows why high interest loans that are frequently made to lower income borrowers deserve careful scrutiny....A protest by the Inner City Press/Community on the Move and Fair Finance Watch apparently helped NCF and SunTrust see the light... Those words should be a wake-up call to local companies that want to deal in those types of loans. Unless they're willing to accept more regulation and greater accountability, maybe more major financial institutions will follow the lead of NCF and SunTrust.
And then car title lenders will know what it feels like to struggle to get a loan."

  That last sentiment, we like how the Commercial Appeal's editorial board put it. (Click here for the full text of these editorial, and more). Still, what's up with Wachovia, JPM Chase and the others? Developing...

   The hidden will be revealed: in Inner City Press' ongoing FOIA case, ICP has begun to receive some of the records it requested from the Washington State Attorney General 18 months ago. One of the more interesting, for now, is an e-mail from staffer Paul Silver to a half-dozen others, the day the HSBC - Household deal was announced: "This was likely in the works as we were negotiating with Household, and why they were willing to settle with us quickly." But what, then, of the rationale for the settlement's limitations, that it was all that Household could afford? We'll get to the bottom of this... On Friday, July 30 the Washington AG's Office's Public Records Manager specified that there remain six boxes of documents. Two of the boxes have been given to HSBC Household to review; Household has been given until August 5 to decide which of these to contest release of, in their appeal of Judge North's decision (reported here). Purportedly, one and a half to two boxes are "privileged" documents, and one box is non-responsive documents. While still unclear of the math, Household's statement that it was only contesting the release of a half-inch of documents was misleading, to say the least....

   It also appears that from March through June, 2004, Household delayed in responding to the Washington AG's Office's request that they review documents that ICP has requested, a year earlier, under the open government laws. The Public Records Manager faxed ICP a copy of the "exemptions log" on the request, which runs to 22 pages and lists documents which the AG’s Office itself is resisting disclosing, and has not shown to Household; it cites RCW 42.17.310(i)(i) [regarding "preliminary drafts"] and (j), again and again. Among the documents within are e-mails from David Huey and Paul Silver (who subsequently left the AG’s Office in a sexual harassment scandal) and Household’s James Kauffman Household’s lawyer Daniel Dunne to Attorney General Gregoire -- saying what, remains to be seen... 

July 26, 2004

  Our news of the week is 45-page challenge filed to Wachovia - SouthTrust, hammering on predatory fringe finance and SouthTrust's (and Wachovia's) misstatements - click here to view. So now there's (another) test base before the Federal Reserve Board. What will the Board do, when a major bank submits a knowingly false statement to it? The July 12 application of Wachovia and SouthTrust states "It is SouthTrust’s policy not to lend to pawn shops, pay day lender, check cashing companies or other MSBs." That statement is patently false; again, click here to see why. But what will the Fed do?

    Last week the American Banker newspaper, reporting on SunTrust’s announcement in response to ICP’s presentation of UCC filings similar to those on Wells Fargo, correctly reported that ICP is "especially critical of Wells' financing of payday lenders that target military service members... Wells Fargo, according to Uniform Commercial Code filings in Nevada, finances Armed Forces Loans Inc. [That's the connection reported here two weeks ago]. Wells Fargo said that it carefully vets its borrowers. 'We have lending relationships with many financial institutions including consumer finance companies,' a spokeswoman said. "In these relationships we require representations and warranties as well as loan covenants requiring that the company comply with applicable laws and regulations.'" So high cost payday loans to active duty soldiers -- of the type denounced by base commands and even last week in the Senate by deputy undersecretary of defense Charles Abell -- these pass Wells Fargo's "carefully vetting"? Outrageous.

   HSBC's spokeswoman, Kathleen Rizzo Young, tried last week to badmouth Washington State Judge North's FOIA decision (covered here saying that "the possible consequence of today's decision is that any citizen who has provided confidential information to law enforcement personnel may find that some or all of that information could now be made public." But HSBC Household has sought to block the release of any and all information to Inner City Press, not only in Washington but in Texas, and not only information which Household submitted...

  The Bellingham Herald of July 21 had an editorial about the case, which appropriately criticized the predatory lending and the anti-transparency moves of Household (without naming its parent, HSBC), but which concluded that Washington State "Attorney General Christine Gregoire's office must continue to fight the good fight to allow the public to see and scrutinize these documents." This Herald editorial has it all wrong: as this Report reflects, Ms. Gregoire's office waited 18 months after a Public Records Act request ICP filed before showing Household some of the responsive documents, and allowing Household the opportunity to sue to block the release of even these documents. Inner City Press made similar freedom of information requests to others of the 46 attorneys general who settled with Household; many of these attorneys general provided the responsive documents in less than a month, without showing Household, and without trying to charge photocopy fees. in 2002, before the settlement was even finalized (and AFTER HSBC announced it would buy Household for $14 billion), ICP wrote to Ms. Gregoire and asked why the scope of the settlement did not include any reforms to Household's mortgage loans through brokers, and to Household's non-mortgage loans, including high-cost tax refund anticipation loans. Her answer is still online on the Attorney General's web site,

  We've asked who this mysterious financial analyst was, and still have no answer. So we think the Herald got it wrong, in concluding that "Gregoire's office must continue to fight the good fight." Gregoire's office should START the comply with the spirit and letter of the public records act -- including before the voters of Washington State must decide whether to vote for Ms. Gregoire in the gubernatorial race, based on her questionable narrow (and still mysterious) settlement with Household....

July 19, 2004

  The often-cleansing power of public disclosure is opposed by HSBC and its only half-reformed Household International unit: last week HSBC Household vociferously opposed Inner City Press / Fair Finance Watch's motion to be heard in the lawsuit that Household filed to block the release of any of the documents which ICP requested, 18 months ago, from the Washington State Attorney General's Office. A Washington State newspaper, the Bellingham Herald, has already intervened in the case, without Household raising any objection. Now Household argues that since the Herald is in, ICP is "not necessary" -- even though it's ICP's request for documents which triggered Household's litigation. Here are quotes from HSBC Household's July 16th filing:

"Inner City's interests are identical to those of the Washington Newspaper Intervenors. All are private media organizations that seek the public disclosure of identical documents by the State of Washington under the Public Disclosure Act [PDA]...It appears that Inner City, an activist organization that frequently reports on litigation in which is has taken part, may simply be attempting to use its intervention in this case to raise its own profile," etc.

  HSBC's ad hominem (or "ad organization") argument notwithstanding, the interests of a consumer protection organization, which intends to use the long-withheld records to advocate in many forums against Household's ongoing predatory practices, and HSBC's gaming of the regulatory process, are notably different than the interests of a local newspaper which would report in one-off fashion on some but not all of the documents. In fact, it is possible that the Newspaper Intervenor(s) would be willing to settle the case for some but not all of the withheld documents. It is telling that Household did not oppose the Herald's motion to intervene, but now opposed ICP's motion -- one could conclude that Household views the Herald as a friendlier, or easier, opponent.

We will report on this site -- as Household accuses, as quoted above -- on this litigation in which ICP/Fair Finance Watch is involved. But litigation against Household's predatory practices is not limited to that which ICP is able to bring: the Associated Press of July 16 reported that "a federal appeals court has affirmed the certification of a nationwide class in a lawsuit accusing... H&R Block and its banking partner, Household Finance, violated the federal Racketeer Influenced and Corrupt Organizations Act. H&R Block, the nation's largest tax preparer, and Household Finance are accused of illegally gouging customers by providing 'refund anticipation loans' at interest rates frequently exceeding 100 percent. 'The basic claim is that defendants lead the borrowers to believe that that tax preparer is their fiduciary, much as if they had hired a lawyer or accountant to prepare their tax returns, as affluent people do, whereas, unbeknownst to them, the tax preparer is engaged in self-dealing,' Judge Richard Posner wrote for the court." This same logic, of course, applies to many mortgage brokers, including those funneling unsuspecting borrowers to Household through HSBC's Decision One unit, which was not subject to any reforms or injunctive relief in the settlements agreed to by the Washington Attorney General and others...

   As we go to press, a copy of the Washington Attorney General's Office brief rolls in: it opposes Household's request for a preliminary injunction barring disclosure of the records the AG's Office was going to disclose, but doesn't speak to any responsive documents that the AG's Office may be trying to withhold. Still, it states that "though an attempt was made at negotiating a written confidentiality agreement between HFC and the States, it was unsuccessful... Nondisclosure of the record of the settlement negotiations is no longer essential to effective law enforcement." Well alright -- let's have those records, then any other responsive records that the AG's Office has withheld these 18 months. Developing....

   In other high-cost lending news, it’s been quiet, it’s been stealth, but notorious charter-renter County Bank’s application to become a bank holding company continues to be processed by the Federal Reserve. Last week Inner City Press received from County Bank a series of responses, including County Bank’s projected payday lending volumes for 2004 ($385 million), 2005 ($405 million) and 2006 ($425 million). That is, County Bank projects the volume to rise five percent a year... County Bank states that it has nine full time employees in the Short Term Loan (STL) Department; "there are also three employees in the audit department who are dedicated to the STL program." It’s not enough...

  Also received, from Royal Bank of Scotland’s Citizens Bank, is a response to this Federal Reserve question: "With respect to your June 23, 2004 submission... please indicate whether Citizens Mortgage Corporation reports the loans generated in a correspondent capacity under the Home Mortgage Disclosure Act." This is an issue which ICP raised when, after the comment period closed, RBS Citizens off-handedly disclosed convoluted partnerships that it has with a number of questionable subprime lenders. RBS Citizens' July 9 answer -- well, the "public portion" of its answer -- to the above-quoted Fed question runs as follows: "CMC does not report any subprime loans that it originates in a correspondent capacity under the [HMDA]... CMC does not review the application for, or making the credit decision on, any such mortgage loan; rather, these actions are performed exclusively by the unaffiliated investor that underwrites the mortgage loan and to which CMC eventually sells the mortgage loan in the secondary market."

So let's get this straight: a person is at RBS Citizens for a mortgage, and is shunted to an "unaffiliated" subprime lender, yet somehow RBS Citizens still appears to make the loan, to the extent of later selling it to the same unaffiliated subprime lender, now called an investor. This convoluted structure, ICP contends, does not comply with HMDA or ECOA, and also calls into question many of RBS Citizens' claims about its lending record. Developing...

  Finally, for this week, what can be said of the OTS’ James Gilleran? Inner City Press first heard him speak from a podium in a Washington hotel, where to a diverse audience Gilleran mused that he’d driven through the Watts riots, and had had "a black golfing partner." Now he quadruples the size of thrift exempt from full Community Reinvestment Act exams, claiming that this "burden reduction" will somehow help to prevent money laundering. For shame...

July 12, 2004

   Throughout 2004, Inner City Press has been documenting the links between predatory fringe finance practitioners like payday and car title lenders, pawnshops and check cashiers, and major banks, many of them engaged in mergers or expansion. This week’s focus is on a bank which is not in the midst of a merger, but which has hit a new low: Wells Fargo. Beyond the public fight about Wells subprime mortgages -- which as we’ve pointed out is letting off scrutiny Wells’ non-mortgage personal loans -- Inner City Press is assembling a report on Wells and the Fringe. Dozens of payday and car title lenders, financed by Wells Fargo. The worst, however, is Wells’ funding of a payday lender whose focus is soldiers: Armed Forces Loans, Inc.. There are some others:

EXPRESS TITLE & PAYDAY LOANS, INC. of 1131 WARREN LANE, VERNON HILLS, ILLINOIS 60061, financed by WELLS FARGO BANK, N.A., according to an Illinois Uniform Commercial Code filing

EZ PAWN HOLDINGS, INC., of 1901 CAPITAL PARKWAY, AUSTIN, TX 78746 (financed by Wells Fargo Bank, N.A., as recently as April 13, 2004, according to Uniform Commercial Code filings);

ADVANCE AMERICA CASH ADVANCE CENTERS, headquartered as 135 NORTH CHURCH STREET, SPARTANBURG, SC 29306, multiply financed by Wells Fargo, including in 2004;




AUTO PAWN, INC. of 7534 HICKMAN RD, DES MOINES, IA 50322, financed by WELLS FARGO BANK IOWA, N.A., according to Iowa UCC records;

PAYDAY LOANS III, L.L.C. in Idado, financed by WELLS FARGO BANK, N.A.


1 STOP CHECK CASHING $ PAYDAY & TITLE LOANS, LLC, financed by WELLS FARGO BANK, NATIONAL ASSOCIATION, according to a May 6, 2004, Arizona UCC filing



and, again, ARMED FORCES LOANS INC. of 3824 S JONES STE G, LAS VEGAS, NV 89103...

* * *

  Now JPM Chase is applying to convert to a national bank, to preempt state consumer protection laws, and to move its bank headquarters out of New York, to Ohio. Notice of the move was stealth: a small type legal blurb in the classified ads of the Columbus Dispatch newspaper. It's reminiscent of Chase's silence was it moved last Fall to charter a federal savings bank. ICP stumbled on the notice and commented; Chase claimed it was too late, but also said that it would keep its bank operations in New York, New Jersey and Connecticut under a New York State charter. Apparently, something's changed, and Chase wants preemption from state consumer protection laws for all of its business -- in fact, Chase tells the American Banker (July 12, hats off) that it "has decided not to use the thrift charter that it established this year," that "the national charter will allow the new bank, like Bank One and like all of our major competitors, to follow uniform national regulation rather than separate rules for each state in which we operate." Of course, the Office of the Comptroller of the Currency has done nothing, to date, about national banks' funding of payday lenders, pawnshops and car title lenders, a business that JPM Chase is involved in and defends. Chase claimed to Russ Wiles of the Arizona Republic, in an article entitled "Chase - Bank One Merger Review Airs Dirty Laundry," that "the two companies are committed to fighting predatory lending and... recently announced a $400,000 grant to work with credit unions in expanding alternatives to payday loans for people in a cash bind." Meanwhile, the two banks keep funding payday lenders nationwide, to a tune much larger than $400,000... The Arizona Republic article concluded: "given high scrutiny of megabanks these days, it's worth remembering that reputations matter. Top officials of the new firm might want to rethink their links to these less-savory lending areas." Yep...

  In other preemption news, in abandoning New York State for Delaware and a national bank charter, HSBC claimed publicly that preemption for its subprime unit Household International was not the goal. Well, it is now reported that Household is dropping ITLA’s Imperial Capital Bank as its partner for high-cost tax refund anticipation loans, and shifting to HSBC Bank USA, which can now preempt state usury caps with its national charter...

  Meanwhile, in the run-up to the scheduled July 20 hearing in Seattle in which HSBC’s Household is seeking to block release of documents ICP requested 18 months ago, it now appears that one or more other media outlets will also be endeavoring to intervene in the case, to force release of the documents. It’s heating up; developments will be reported this site (click here to see the declaration ICP filed with the court in Seattle on July 9).

  BofA goes bush league: last week, in announcing that it is buying the rights to call itself "the official bank of baseball," BofA’s Cathy Bessant said that "the pairing of the high-profile Major League Baseball deal with the minor leagues and Little League as consistent with Bank of America's efforts to be active in individual neighborhoods." Hmm -- BofA has twice now tried to drown out the issues of local neighborhoods with unilateral nationwide pledges, of $350 billion (BofA - Nationsbank) and $750 billion (BofA - Fleet). Individual neighborhoods, and even whole states like New Mexico, have become minor league to BofA in Charlotte...

July 5, 2004

   The fringe finance issues Inner City Press / Fair Finance Watch has been raising this year continue to develop, including before the Federal Reserve. On July 1, from Huntington Bancshares' lawyers a copy of the bank's response to Fed questions of June 1. The Fed's question #1:

1. Discuss whether Huntington, Unizan, or any of their affiliates have business
relationships, including as commercial or warehouse lender, purchaser, custodian, servicer, or in any other financial capacity, with any providers of non-traditional banking products, such as pawn shops, gun shops, or check cashing stores (individually and collectively, "providers"). If so, identify the relevant business parties and describe the nature of the business relationships, including the respective roles and responsibilities of the providers and the Huntington or Unizan entities involved in each type of relationship.

   The entirety of Huntington's public answer to this is: "Please refer to Confidential Exhibit A for a summary of these business relationships." This does not comply with FOIA, both in that Huntington has not shown likelihood of competitive harm (esp. given that many of its peers, named in ICP's exhibits, release such information, and in that ICP has already submitted to the Fed (and Huntington and its counsel) publicly available information such as

--an Ohio UCC filing showing Huntington National Bank's relationship with Uncle Sam's Pawn Shop, Inc. of Columbus, Ohio -- note that the relationship runs at least through October 8, 2007;

--an Ohio UCC filing showing Huntington National Bank's relationship with AA Pawn Shop, LCC of Lancaster, Ohio -- note that the relationship runs at least through June 5, 2005;

--a West Virginia UCC filing dated October 7, 2002 showing Huntington National Bank's relationship with Carl's Pawn Shop, Inc. of Parkersburg, West Virginia;

--a Florida UCC filing showing Huntington National Bank's relationship with Paradise Pawn, Inc. of Melbourne, Florida;

--a Florida UCC filing showing Huntington National Bank's relationship with Quick - Cash Pawn Shop East, Inc. of Tampa, Florida;

--a New Jersey UCC filing dated October 7, 2002 showing Huntington National Bank's relationship with Express Check Cashing, Inc.; etc.

   It is frivolous to request confidential treatment for information that is otherwise publicly available, particularly where the public availability of such information has been shown in the same underlying proceeding.

  Huntington's July 1 submission also recites Fed question #2

2. Discuss whether the Huntington or Unizan subsidiaries have any role, formal or otherwise, in the lending practices and credit review processes of the providers. Additionally, describe any due diligence conducted by Huntington or Unizan when either enters into these business relationships concerning a provider's compliance with applicable fair lending and consumer protection laws, including:
(a) the substance of any representations and warranties that Huntington or
Unizan requires of such entities;
(b) any agreements Huntington or Unizan requires such entities to enter into;
(c) any monitoring or other ongoing procedures Huntington or Unizan has
adopted to assess compliance with these laws.

  As to due diligence, and sub-questions a, b and c, Huntington refers to "Confidential Exhibit B." But Huntington's outside counsel's previous client, Firstar / U.S. Bancorp, has released such information during a proceeding before the FRB, undercutting the instant formulaic claim that Huntington would suffer significant competitive harm if this information were released. Huntington's exhibits should be release forthwith, ICP has argued in a FOIA request / appeal... A side question: why hasn't the OCC, which claims to be so concerned with predatory lending, asked Huntington National Bank any questions?

   Also concerning Huntington, in Detroit on June 29 U.S. District Judge Paul Borman upheld a decision to detain a former assistant bank vice president of the bank, for the unauthorized wiring of $438,000 to banks in Lebanon and Jordan. Issam Abdul Hakim-Berjaoui has been charged with bank fraud, money laundering and embezzlement. So far, Huntington has escape (or evaded) scrutiny. Prosecutors are seeking, under treaty, bank records from Jordan; no such arrangement, however, exists between Lebanon and the United States...

  What's in a name? Attempting to put behind it the swirl of predatory servicing issues, last week Fairbanks changed its name to Select Portfolio Servicing Inc.. "We wanted a name that reflected our new philosophy going forward, our new culture," President Matt Hollingsworth said. Hmm. We thought you just wanted to confuse the public, that you're not Fairbanks, long-alleged to be predatory...

  From Seattle news reaches us, that Judge Douglas North has chosen July 20 for the hearing on HSBC Household's motion to keep secret information about Household's practices that led to the (too-narrow) predatory lending settlement. Click here for more; developing...

June 28, 2004

   Last week Wachovia announced a proposal to buy SouthTrust, for $14.3 billion. Wachovia is, in essence, the old First Union, failed purchaser of subprime lender The Money Store, still subprime servicer with the unmelodious, antiquated name of HomEq -- and, as ICP's research shows, funder of payday lenders and pawnshops, through what's called its footprint. Responding to inquiries on the day the deal was announced, ICP put together a preliminary study, showing for example that Wachovia funds and enables:


   SouthTrust funds and enables GUN RUNNER AND PAWN, L.LC. (Alabama); A-1 JEWELRY & PAWN, INC. (Georgia); AMERICAN TRADING POST PAWN INC. (Florida); BEST PAWN & EXCHANGE CO INC (Alabama); CROWN PAWN, LLC (South Carolina); GASTON MUSIC & PAWN INC. (North Carolina); CHECK CASHING INC. (Alabama); JJ'S PAWN (Texas); OK PAWN AND JEWELRY, INC. (Florida); QUICK CASH PAWN, INC. (Alabama); SHOOT STRAIGHT PAWN AND AUCTION CO., INC. (Florida); and RYDER PAWN & GUN (Mississippi).

   Reuters was struck by the first of SouthTrust's fundees (see, "Pawn Shops Set Activist Against SouthTrust Deal," Reuters, June 21, 2004). The Associated Press reported that ICP will be opposing Wachovia's applications. And we will -- unlike SunTrust did, we'd encourage Wachovia to at least purport to address these predatory fringe finance issues when it submits its application....

* * *

  J.P. Morgan Chase and Bank One last week claimed (via press release to be funding alternatives to high-cost payday lenders, with a $400,000 grant. But the two banks are playing a double game: they finance dozens of payday lending companies which charge interest rates over 300%. As Inner City Press documented at the Federal Reserve's merger hearing in April, the two banks have taken secured interests in, among others, First American Cash Advance, a payday lender with 330 offices in 11 states, Illinois Payday Loans, Inc., Discount Payday Loans (Colorado), Mister Payday of Kentucky, Inc, and First Cash Financial, including a top-ten pawnshop chain with 130 storefronts in 11 states. This enabling of predatory lending is what the two banks have a responsibility to clean up: no $400,000 grant outweighs the harm caused by two banks' own actions. We will be following up on this...

  The Office of the Comptroller of the Currency has hit a new low: the willful disregard of predatory lending information, despite its loud offer of preemption powers to banks and affiliated subprime lenders. The OCC's June 23 approval for HSBC to charter a national bank states that "many of the concerns raised by [ICP] related to HHI and its non-bank subsidiaries. However... the OCC currently has not regulatory authority over these entities... Accordingly, the OCC was unable to address these concerns." But if and when HSBC tries to shift Household into an operating subsidiary of its national bank, the terse op-sub notice in the OCC's Weekly Bulletin will in all likelihood be unintelligible and missed; in any event, the OCC doesn't even explicitly solicit, accept or consider public comment on such shifts into op-subs. So while the OCC had the comments, it claims it "was unable to address these concerns;" preemption can be granted later, in a stealth and secret proceeding. Similarly, despite the submission to the OCC's Chicago office of proof that Huntington National Bank funds and enables pawnshops and other fringe financiers, we're unaware of any OCC questions or actions on this issue. Meanwhile, the OCC announced another 34 CRA ratings -- all Outstanding or Satisfactory. Where is enforcement? Nowhere to be found...

  Meanwhile, the Treasury Department's general counsel from 2001 to 2003, David Aufhauser, has joined the Swiss bank UBS, already home to ex-Sen. Phil Gramm.... Also from the department of where-are-they-now, ex-Rep. LaFalce has shown up, lobbying for World Savings Bank. LaFalce explains: "I was impressed... because of their pro-consumer stance on so many issues." Hmm...

June 21, 2004

  Here, there and everywhere: the Federal Reserve's failure to act on payday and predatory lending, is addressed in ICP's JPM Chase Watch. But at least public notice was given that JPM Chase - Bank One would be voted on by the governors. Not so with Regions - Union Planters: no notice was given, perhaps it was done without a meeting, by so-called "notational" voting, an even more rubbery rubber stamp. The order, including the criticism of the Regions' lending in Atlanta, is analyzed in ICP's Bank Beat Report, along with the delay of Huntington - Unizan, which ICP challenged months ago.

   On HSBC Household, the sleazy attempt to block the release of information continues. Update of June 17-18, 2004: At five p.m. Eastern on June 17, the Washington State Attorney General's office informed Inner City Press that HSBC's Household was going to court on June 18, to try to block release of information ICP has requested regarding Household's predatory lending settlements. ICP was faxed, by the Washington AG and not HSBC Household, a copy of the June 17 letter that Household's lawyers at Heller Ehrman White & McAuliffe LLP sent to the Washington AG's Office, stating among other things that

"You advised us of the Attorney General's intention to release, on June 21, the 'settlement-related documents we had previously provided for your review, unless prior to that time Household is able to successfully assert the documents are exempt from disclosure"... Household Finance Corporation intends to file a civil action on Friday, June 18, seeking to enjoin the State of Washington from disclosing these documents. Household intends to appear in the ex parte department of the King County Superior Court at 2:00 p.m. on June 18 to seek a temporary restraining order prohibiting such disclosure. We are commencing our legal briefing as I write, but I wanted to give you as much advance notice as possible of our court appearance so that you could make appropriate arrangements. In order to afford the parties appropriate time for briefing of the Public Disclosure Act issues, I propose that the Attorney General not oppose the motion for temporary restraining order to be filed on Friday, and that the parties agree to an appropriate schedule for briefing on preliminary injunction." Darnel J. Dunne, Jr.

   Inner City Press immediately faxed a letter to the Washington Attorney General's office, summarized in ICP's HSBC Watch Report. Has HSBC made Household better? No. ICP has explicitly asked the Fed to examine Household as it did CitiFinancial -- all actions and inactions will be reported on this site. BNP Paribas has admitted its business relations with Household, CitiFinancial, and AIG's American General, which was recently subject to an enforcement action by state authorities in New Jersey.

  BNP is also embroiled in the Iraq Oil-For-Food scandal, as detailed in ICP's Finance Watch / Anti-Money Laundering Report.

We don't usually do this, but.... The June 7 Crain's New York Business had an article about Inner City Press, the news hook was the Federal Reserve's $70 million fine of Citigroup for predatory lending. The next week's Crain's, dated June 14, had a letter from a New York lawyer, complaining that "Crain's puff piece reports as fact a laundry list of alleged [ICP] victories over banks, but fails to include even a single quote from an industry representative or regulator on the receiving end of [these] attacks. Whatever the merits of [ICP]'s ongoing crusade against New York banks and their regulators, Crain's readers are entitled to at least a little analysis and critical reporting to help them arrive at an informed opinion."

   Okay then: ICP can report that JPM Chase's CRA officer was given an opportunity to comment, but declined to do so, and that a Federal Reserve official was interviewed, on condition of anonymity, and was quoted without name in the article. So what's (and where's) the beef? Or is it merely, as it's put in Spanish, uvas armargas? The letter-writer happens to be representing North Fork, a Long Island based bank ICP's opposing, noting among other things its pawnshop funding; this is not disclosed in the letter or signature block... Perhaps beyond sour grapes the letter's an invitation to call for negative quotes. We'll see.

June 14, 2004

  This week a medley of news from all over (Buffalo, Tennessee, Maryland and even GE Russia).

  Watching the Detectives: while HSBC's Household continues to fight to conceal information -- ICP is informed that, after more than a year, the Washington Attorney General's office has now given Household ten days to make final arguments against document release -- this week the focus will be on information ICP has obtained from inside Household. For example, a two-page intra-Household bulletin, in which Household's Mike Eden, Rob O'Han, Greg Zeeman and Ann Gaultney tell "all U.S. HFC and Beneficial Branch Offices and Management" that "as part of the Consumer Protection Plan," PriceWaterhouseCoopers ("PwC" or the "Monitor" will be "visiting Household and Beneficial Consumer Lender retail branch offices on a random and unannounced basis." Branch staff are prepped for the visits, and are told that "[f]or security and privacy purposes, the Monitor should not be allowed unsupervised access to your facilities or the system." Among CitiFinancial's slip-ups was the staged "mystery" shopping, which ICP exposed through documents provided by whistleblowers. HSBC's Household for some reason believes that its intra-company memos will never see the light of day, or that the regulators are tired, or that it could in any event preempt any pesky state law. ICP is opposing all of that...See, e.g., "HSBC Hit on Downstate Minority Lending Patterns; Activist Also Seeks to Block Merger of Charter One, Citizens Financial," by Jonathan Epstein, Buffalo News, June 13, 2004.

  A bit more insight into CitiFinancial, from (among our favorite) sources:

Subj: Everything you always wanted to know about credit insurance but was afraid to ask

Date: 6/8/04 3:02:08 PM Eastern Daylight Time

From: [Long Time District Manager]

To: CitiWatch [at]

Re: ICP's pressure to revise Citi's personal property insurance sales. I followed this closely. It was awfully embarrassing to ask for fishing tackle, bug zappers (literally), and ice chests as security. Bravo to ICP!

...As far as the ancillary products, we sold Home and Auto (an over inflated auto club program that included additional warranties on major home appliances, emergency room/ambulance reimbursements, support to initiate neighborhood watch programs, child registry, etc. Really not a lot to do with respect to a personal or home equity loan. We sold them in 1, 3, 5 & 10 year policies at premiums of from $249 to $1749. The approach we took to selling these was to sell three year or less policies on our personal loans, and 5 year or more policies on anything that was secured on real estate...

    On CNNfn's Money Gang last week (6/8), Farrell said what "bothers me about Citigroup is the executive compensation. Mr. Weil retired last year and he got like $38 million or $40 million as a going away present and Mr. Prince that came in, he was a chairman for brief period, got like $29 million. And Robert Rubin , who I think is one of the great people in finance." KIERNAN: But he hasn't been with the company for all that long. FARRELL: Well, he has one direct report, which I think is his secretary. He gets paid something like $15 million. And that bothers me that there's this pay scale that exists. ICP note: particularly at a predatory lender...

    In the Regions - Union Planters proceeding, Regions' counsel Sullivan & Cromwell on June 9 answered another round of questions from the Federal Reserve. The questions concerned Regions' subprime unit EquiFirst: "provide criteria EquiFirst uses to select brokers in its wholesale mortgage broker channel... Describe efforts by EquiFirst to ensure that prospective borrowers, including minority individuals, are not disproportionately or inappropriately targeted for subprime loans [including] any efforts in developing broker channels to obtain a geographic mix or any other type of mix or any other efforts to obtain a 'balanced market' through these broker channels." Regions' answer to the discriminatory targeting question is particularly weak, and does not address the "balanced market" portion of the question at all...

   Alongside the other Wells Fargo Financial news last week, the actual Maryland Commission on Human Relations subpoena on WFF was interesting. Among other things, it asks for "any and all underwriting guidelines, policies and standards of WFF applicable to applications for loans secured by residential real estate (owner occupied) in the State of Maryland at any time during the period of January 1, 2002 to the present."

   Carrying high-rate consumer finance into Russia: the newspaper Vedomosti reported last week that GE Capital plans to start operations in Moscow by year-end, led in Moscow by James Cook, former head of Delta Capital Management fund and Delta Credit bank. GE Capital plans to offer "consumer loans"...

   The Fed has finally asked Royal Bank of Scotland some questions; ICP on June 10 received by fax a copy of RBS' June 7 response. The questions were soft-balls: "describe due diligence performed," proposed "systems integration," and two purportedly confidential questions. Then again, these are (only) the questions of the Boston Reserve Bank. The Board, if they are even moderately consistent with other recent proceedings, will ask more and better questions. The June 17 closing of the comment period should be extended...

    The Fed is not doing its job: we're referring, most recently, to the Fed's approval of National City - Provident, with the payday lending issue confined to a footnote, despite UCC evidence presented and NatCity's admission that it funds four of the top ten payday lenders, with APRs over 500 percent. The Fed coddles predatory lending -- and won't even explain why. Here's hoping the Fed does at least a more credible job on JPM Chase- Bank One (more on that next week), on Regions - Union Planters, on Huntington and then SunTrust. Developing...  

June 7, 2004

  At last, the Federal Reserve has begrudgingly followed-up on evidence ICP / Fair Finance Watch has submitted about banks funding pawnshops, check cashers and rent-to-own businesses. It's been incremental: first, based on comments and Uniform Commercial Code filings, the Fed asked National City and Bank One / JPM Chase about support for payday lenders. Then the Fed asked Regions / Union Planters about funding car title lenders. The next step took place last week: a June 2 response by North Fork Bank recited the following Federal Reserve question:

"For any business relationship (e.g. commercial lender, warehouse lender, purchaser, custodian, etc.) that North Fork or GreenPoint or any of their affiliates have with any subprime lenders (including providers of non-traditional banking products, such as check cashers, title lenders, pawn shops, or rent-to-own businesses): (i) identify the relevant business parties and (ii) describe the nature of the business relationships... Additionally, to the extend not already covered in your May 10, 2004 response to the comments of the Inner City Press Community on the Move & Fair Finance Watch ('the May 10 response'), describe any due diligence that North Fork or GreenPoint typically conducts concerning any such subprime lender's compliance with applicable fair lending and consumer protection laws prior to North Fork or GreenPoint entering into these business relationships, including... (c) any monitoring or other ongoing procedures North Fork or GreenPoint has adopted to access compliance with these laws. Provide a copy of such procedures that are used to determine whether third party originators are engaged in, or facilitating, abusive and/or predatory lending practices."

  ICP has submitted this question with regard to at least two other applications pending before the Fed: Huntington - Unizan, and BNP - Community First. The Fed should be consistent between regions, it would seem...

  Meanwhile, more and more detailed information is reaching ICP about CitiFinancial, in the wake of the $70 million settlement-on-the-cheap announced May 27. Here are dueling (interacting) messages, from "13 year branch manager" and "long-time district manager" (who we'll call "LTDM"). In reverse order:

Subj: Consumer Appreciation Days [at CitiFinancial]

Date: 6/1/04 10:05:43 AM Eastern Daylight Time

From: ["LTDM"]

To: CitiWatch [at]

Just read the excerpt from the 13-year manager re: CAD (Customer Appreciation Days). This is one of those events that I was going to allude to down the road. This manager is right on in his/her assessment. It's a program that has gone on for years. At one time it lasted from 3 days to a week during the months of May and November. It has since become a two week stint. Honestly, we drove it like hell! Recognition for a successful CAD month was EXTREMELY HIGH! We expected branches to write 100 loans during a week's period of time.. and yes, God help the manager whose area didn't have substantial growth after a week of this type of production! Usually they did, but occasionally there were those areas that kept the brow beatings at bay by simply "re-writing balances only" (just a straight refinance of an account with nominal cash advance). The loans were not supposed to simply help the customer w/a refinanced loan at a lower payment, the loan was to increase the amount owed by the borrower, increase the security (collateral) position, and provide further "protection" on the loan.

"Protection" was the safe means to refer to credit and ancillary insurance products. We coached to offer protection, not credit insurance - ever. Thirty percent of a branch's profit is attributed to the sales of insurance products. In fact, from the credit insurance premiums that a branch sold, they received 35% commission if Accident & Health or Involuntary Unemployment Insurance, and 30% commission if for credit life insurance. All of the ancillary products - which included something called Home and Auto - are worth 40% commission back to the branch. Every branch, as well as every employee is required to track their results. Regardless of the staff position, every one is held accountable to produce at acceptable levels. This is not measured simply by the dollar amount of premium sold, either. For instance, it is possible for an employee to sell as much as $20,000 insurance premiums on a $120,000 loan. The $20,000 premium may satisfy that employee's premium goal but that was never regarded as sufficient measure! Insurance sales were tracked on "dollar per thousand" , or "dollar per hundred". This was a method whereby the amount of premium was measured against the total loan volume (or in the case of personal loans, it was measured against the "total of payments"), in order to keep track of the percentage of premium sales. Normally every insurance product that was sold was tracked on an individual employee basis: credit life, credit disability (accident and health), credit involuntary unemployment, and the various ancillary products.

As for SFC's...these are those accounts generated from a retail sales contract that was opened to finance a customer's purchase from a community business (furniture, appliances, home improvement items). In order to appeal to the business owner, Citi offered great programs such as 90-, 120-, even 360-day same-as-cash, or no interest etc., at very reasonable interest rates as low as 16.99% to 24.99% depending upon the quality of business that the business can generate. As these contracts are purchased into the branches, it is the responsibility of the branch team to "convert" them into personal, Equity Plus, or real estate loans. The SFC program was tracked as intensely as the insurance sales were. And again, certain rules applied to ensure growth to the branch: there had to be a $500 advance on these loans in order to get ROC-opoly credit. Huge audit violation to payoff a deferred program sales finance account, but everything else had to be converted because no income is credited to the branch from the existence of sale finance accounts. On any branch-, district-, state- (any level really) Goal Report, or ROC Report as it came to be known, you could see the profit margin that was possible given the sales finance base, but the next line to the report subtracted out that income. The income went somewhere (!), but the branches were not entitled to include it in the Funny Money known as the ROC Report (which ultimately lead to what was then annual bonuses of up to a full year salary for some branch managers!), or ROCopoly. (I guess that's some of the profit that allows Citi to buy out restitution programs when they really screw up!)

LTDM added:

Subj: Re: CAD

Date: 6/1/04 10:39:31 PM Eastern Daylight Time

From: ["LTDM"]

To: CitiWatch [at]

... Every time that we would merge with or acquire another faction, I always pitied the poor bastards for the integration process that we would require. It was always a big deal when we merged with or acquired another group, to run a huge solicitation program of some kind or another. The idea was that we would host a "grand re-opening" by acquainting our new customer base to CitiFinancial. That's probably why the "13 year manager" from whom you recently received correspondence is feeling so much pressure. Besides CAD being CAD, there's the additional expectations of what the new WaMu branches can provide, and if they are not doing so, how the existing Citi branch managers can set the tone for them...

"Making Payoffs difficult" -- We had a whole program - "Save a Payoff"! My branches could not quote a payoff until they faxed me the demand, and I personally called the customer to find out what they were going to get in replacement of my Citi financing. I was to coach my branch managers that they have 28 days to get the payoff to the requesting party and if any one had any issues about this length of time required to respond that they should call the District Manager, myself. For awhile, we (District Managers) were instructed to have the customer call our Region Managers if we could not convince the customer to not pay off their account. Of course there was a two fold message to this: 1) the DM clearly did not have the capacity to bargain with the customer. 2) the DM needed to be humiliated by calling upon their RM for support. The response from the branches may, or may not have been that calculated. The work load in the branches is immense! So the fact that payoff demands are delayed may not always be at the DM/RM directive, it could also be that the branches are simply over burdened and are unable to respond to the request.

...The organization really needs to come down from the TOP. I have sat and dined at Chairman's Forum events with Sandy. What a pompous ass... He has his wife deliver PR to a eight person banquet table so he doesn't have to intermingle! I have observed Bill Clements make a fool of himself kissing K.C.'s ass during a manager's meeting. I have listened to Bill and his Region Managers discuss how they were going to "...piss [xxx] off to see how {he/she} responds" .... That is how Citi management operates.

Until another time....Regards!

And now, 13 Yearzo's most recent:

Subj: Re: Citifinancial practices- many thanks for your message; a few questions, a...

Date: 6/2/04 12:32:29 AM Eastern Daylight Time

From: ["13 year branch manager"]

To: CitiWatch [at]

Here's my attempt to answer your questions... While "breaking delinquency" is a huge item at Citi, we wouldn't put deals into equity plus loans because it took too long with these disclosures. Sales conversions were not converted to break delinquency because we didn't have them as delinquent accounts in the branch. Sales were converted to equity loans for growth and profit. Personal loans were rewritten to make additional income and cure delinquency. Understand that Citi wants all accounts to be less than 30 days delinquent by the last working day of the month. Branch employees will do ANYTHING necessary to not carry an account delinquent. Rewrites, free deferments, payment manipulation, etc. Understand they MUST collect or move these accounts to prevent serious problems from supervision.

Hope this helps. Please keep my name confidential... But you can ask me questions anytime.

  Oh, we will, we will...

June 1, 2004

  As with last week's report of the upholding of Georgia's anti-payday lending law, we can begin again with good news: the attempt by notorious charter-renter County Bank to remove the case against it from New York State to federal court has failed. New York's usury cap is 25 percent, while County Bank (and Cashnet and Telecash) have been charging up to 400 percent. Meanwhile, County Bank is trying to form a bank holding company, which ICP and others have opposed. County Bank, however, is a but a small predator. The world's largest bank is engaged in more widespread tricks:

  Just before the holiday, on May 27, the Federal Reserve announced a cease-and-desist enforcement action against Citigroup's subprime CitiFinancial unit, calling for $20 million in restitution, a $50 million fine, and some "remedial" actions -- including revising its compensation structure and its practice of misleading examiners and destroying or hiding documents. The practices the Fed describes in the order -- illegal requiring of co-applicants in order to sell more joint credit insurance, and shifting personal unsecured loan customers into high-cost mortgage loans -- are only a few of CitiFinancial's problematic and predatory practices, the tip of the proverbial iceberg. CitiFinancial's business model is based on the sale of credit insurance that is neither asked for by, nor in most cases beneficial to, the customer, and on "upselling" customers from unsecured to home-secured loans. For example, ICP has evidence that CitiFinancial pays its branch managers based on how many sales finance loans (for furniture, for example) are converted to more lucrative real estate-secured loans. It's called "Sales Finance Conversion," or SFC, in CitiFinancial's compensation scheme, called ROCO-poly [and see new whistleblower letter ICP's received, below.]

But downplayed in the order, in Paragraph 14, is the Fed's requirement that CitiFinancial henceforth ensure "full and honest cooperation with regulatory authorities" and improve "document retention policies." The background to this is instructive, and is fully recounted in our CitiWatch Report.

   While Citigroup was applying to buy European American Bank in 2001, ICP was contacted by CitiFinancial employees in South Carolina, who described how they were ordered and compensated to fool customers, with credit insurance and upselling to high-cost loans. ICP submitted these complaints to the Fed. Soon thereafter, two of the CitiFinancial ex-employees who contacted ICP were threatened by Citigroup with being sued for violating a so-called "non-disparagement" clause they had signed. The clause, by its terms, prohibited the employees from describing, even to regulators, what they were paid to do at CitiFinancial. ICP provided copies of these gag orders to the Fed and to the press. The American Banker of July 30, 2001, reported that the agreement "bars the former employee from making 'any statements to any person regarding the company and its agents of a derogatory nature or which disparages the reputation, business, or integrity of the company or any of the executives or employees of the company.' It also contains a clause barring the former employee from disclosing the agreement." The Fed conditioned its Citi-EAB approval on conducting an examination of CitiFinancial.

  Before the Fed even got the CitiFinancial examination going, Citigroup applied to buy Golden State Bancorp. During this challenge, ICP was contacted by CitiFinancial whistleblowers in Tennessee and elsewhere. ICP submitted these complaints, and evidence, to the Fed, and soon the Federal Reserve Bank of New York sent two attorneys to Knoxville, Tennessee, to depose the CitiFinancial ex-employees who had contacted ICP, and others. ICP also reported to the Fed that CitiFinancial offices removed and shredded documents. ICP named names, and locations: for example specifically at the Morristown and Jefferson City, Tennessee offices. ICP directed the Fed to specific documents that remained unshredded (because whistleblowers had hidden them), in the Jefferson City office.. ICP reported this to the Fed, and asked for copies of the deposition transcripts. The Fed refused to provide the transcripts.

   Now, more than a year later, the Fed fines Citigroup $70 million, while downplaying Citigroup's blatant attempts to conceal and destroy evidence, and to gag its own employees. WorldCom has cost Citigroup $2.6 billion (so far); apparently low income consumers are worth less than three percent of that.

  CitiFinancial on May 27 tried to "spin" both the press and consumer advocates, claiming the problems are behind it. It's important to note that the practices alleged by the Fed were not limited to -- in fact, had nothing to do with -- the business Citigroup bought along with Associates First Capital Corporation in 2000. The biggest bank in the world is still run by predatory lenders, document shredders, silencers of whistleblowers....

   And yet still the info comes in:

Subj: Citifinancial practices

Date: 5/29/04 6:11:28 PM Eastern Daylight Time

From: [13-year CitiFinancial branch manager]

To: CitiWatch [at]

Just read your comments regarding the $70 million dollar Citifinancial settlement. I'll tell you, the pressure is on for managers and staff to book business with high balances at high rate to increase yields and profits. Take these two examples: Citifinancial has a bi-annual event they refer to as Customer Appreciation Days (CAD) in which they "thank" their customers by soliciting them to rewrite their personal loan with either no payment until July (event held in May) or Next Year! (November event). The idea here is to rewrite every customer, recharge them for insurance premiums and fees, and advance a small amount, say $500 or so in order to renew income and cure delinquency. They expect the add 1 month in productivity each time, thus getting 14 months production in 12.

Tracking by branch staff starts with calling customers and setting up appointments early in the month so to maximize the number of rewrites they can get. And, you are accountable for these results! Just another way to increase predatory lending income! (By the way, personal loans are rate structured to 27.99% on renters and 24.99% for homeowners, a rate exception is an audit exception and highly frowned upon by the company!)

As for the lawsuit issue, the pressure is on branch staff to "convert" as many sales accounts to loans as possible. Rocopoly tracks SFCs because the branches don't make any income from sales accounts. They must have a high rate loan to make any money at all. The loans in question were converted sales accounts, written on 90 day, 180 day or 360 day same as cash deals converted to 17.99%-21.99% second mortgage loans. They sometimes used a "blended rate" deal that started at 17-21% for 30 months then reduced to lower rates after that time. They advertised these loans at lower rates because they were "blended"...And the premiums for insurance on these deals were HUGE income for the branches!!!

Stay tuned, there is more. Customers have the "choice" of having a prepayment penalty on their first or second mortgage loans. The choice is whether to pay an additional 1/2 in APR to do it without! And they don't allow customers to refinance for lower rates without taking additional cash! Growth is such an important area to them they penalize customers who want to simply refinance at a lower rate, the same rate they may be offering to other customers with the same credit and loan to value ratio!

The Fed has their hands full if they want to dig a little bit more and tap some of the penalty income they can claim from this predatory lender! Regards -- 13 year branch manager

    Meanwhile, JPM Chase's attempts to downplay anticompetitive effects continue, most recently in a May 21 letter to the Federal Reserve, provided to ICP is heavy redacted form. Much of it revolves around the deposits book at JPMC's 712 Main Street, Houston office, including a large "corporate mortgage finance" account "derived in their entirety from its servicing operations, which are located in Orange, California." Why are the dollar amounts being redacted? How can the Federal Reserve countenance this? Will the Fed not act on Union Planters' funding of car title lender affiliated with organized crime? We'll see... We've filed a second comment on RBS Citizens - Charter One, click here to view. Until next time, for or with more information, contact us.

May 24, 2004

   It's nice to some good news to report -- on May 21, a federal court of appeals declined to continue putting off the effective date of Georgia's anti-payday lending law. And so now, what has been technically illegal in Georgia since the 1950s is more seriously prohibited, including with the threat of jail time. Amazing, then, isn't it, that such banks as National City and Bank One (targeted by JPM Chase) continue to defend their funding and enabling of payday lenders...

   Let's review: back in 2001, Inner City Press challenged Old Kent being acquired by Fifth Third Bank, on redlining grounds, including in Detroit. Fifth Third spokeswoman Stacie Yee said that the banks "stand behind our lending record in all of the communities we serve." (The American Banker, January 24, 2001, " Group Protests Fifth Third-Old Kent Deal"). The Federal Reserve approved the merger. Now, in 2004, the Department of Justice finally files a redlining lawsuit, for lending in 2000 and 2001. We hate to say "we told you so" -- but, we told you so...

  Similarly, here's from ICP's analysis of Regions' lending in Atlanta submitted to FRB on March 26, 2004: "In the Atlanta MSA in 2002, for conventional home purchase loans, Regions (Regions Mortgage plus Regions Financial Corp.) made 445 loans to whites, and only 18 to African Americans -- 24.7 loans to whites for each loan to an African American, for Region's prime-rate lender."

  Regions' May 14 response to Federal Reserve questions quotes the Fed's question number two, about Regions' glaring exclusion of African Americans from its mortgage lending--

"In light of the combined record of Regions Bank and Regions Mortgage, as compared to that of the aggregate and to the demographics in several major markets (particularly in the Atlanta, Georgia, Metropolitan Statistical Area), for receiving HMDA-reportable applications from and originating HMDA-reportable loans to African Americans and in predominantly minority census tracts... please describe... all internal reviews by Regions Bank, including its mortgage company division... (b) all efforts by Regions Bank, including its mortgage company division, to use targeted media to reach African American individuals or residents of minority tracts, (c) all efforts by the bank to develop any significant involvement with community based organizations serving minority individuals and/or residents of minority tracts."

  Regions' answer says that if they application is approved, Regions would start using Union Planters' "mechanism" to analyzed HMDA data. But that hasn't been working too well, either. And Union Planters makes HOEPA loans, and funds car title lenders, including one 50% owned by a reputed Mafia figure...

  The smoke and mirrors won't stop: fresh of buying William Daley to polish its Chicago face, JP Morgan Chase made noise last week that it'll sponsor the "opening of Millennium Park in downtown Chicago July 16-18." There will be tents for JPM-funded payday lenders, and pawn and gun shops, maybe even car title loans -- all courtesy of JPMorgan Chase...

   AIG, the company that clung to an insider-heavy board of directors, and tried most recently to get a shareholders' resolution about its predatory lending knocked off the proxy (apparently using the argument that predatory lending is a part of AIG's "ordinary business") - anyway, now AIG's mausoleum king, Hammered Hank Greenberg, is speechifying against corporate transparency. Of the bipartisan Sarbanes-Oxley bill, Greenberg complained last week that "Some of us have two jobs - the regulatory burden during the day and running the company at night." He also promised (or threatened) that "We're on the hunt," Greenberg said at the company's annual shareholder meeting. "There will be continued consolidation in our industry, both domestic and foreign. We will not overlook that opportunity." Those deals must be done at midnight, since the entire day is spent complying with Sarbanes-Oxley...

   Some in the British press are now warming up to Bill Aldinger, it's hard to see why (except to note that the Mr. Smithers character on The Simpsons™ is popular, too)... For example, The Times of London last week wrote: " The 57-year-old chief also defended Household's interest rates. One of its businesses makes short-term loans to consumers who are expecting a tax rebate. The loans, which are usually only for a couple of months, attract an interest rate of up to 100 per cent. Mr. Aldinger said that the company provided a service to those who could not get loans from anywhere else. Of the criticisms, he said: "My parents were frequent Household customers. They did not have a bank account, they did not ever visit a bank branch." The FT quoted Aldinger that "when I meet customers they are invariably grateful for the availability of credit when they couldn't get it anywhere else." So who were and are those customers who've sued Household for predatory lending? Or does Aldo have a different definition for "invariably"? Look out before you ask: Household has sued two of its employees for whistleblowing.

Finally, from last week's correspondent:

Subj: Re: citifinancial [Second dispatch]

To: CitiWatch [at]

... Marge Magner was integral in training sessions, manager orientations, etc. And yes, there'd be plenty of times when she would facilitate the meeting as well. If not with the actual training materials, but with the evangelical punctuations that she, KC Mead, Bill Clements and Bill Starkey are famous for! I was there for 14 years., so I was in just as Marge was gaining a foothold to her status.. Believe me, every utterance in "rote" training programs were cleared by Marge... Willumstadt was very visible at annual meetings, "kick off meetings" of various kinds....However, he was never as outwardly, warmly endearing for the masses as was the outward facade of Marge, so he was not quite the PR figure that she was...

  Until next time, for or with more information, contact us.

May 17, 2004

    Banks' funding of pawnshops and car title lenders (a/k/a auto pawns) is an issue that ICP / Fair Finance Watch is now working overtime on. On May 14, ICP filed comments with the Federal Reserve Bank of San Francisco -- BNP Paribas, as it turns out, funds such fringe finance players as pawnshops and check cashiers, even gun repair shops, through its Bank of the West unit, which is applying to buy Community First National Bank and expand into ten new states. Click here for ICP's new BNP Paribas Watch. Then, on May 17, ICP commented to the Federal Reserve on SunTrust's week-old proposal to acquire National Commerce Financial Corp.. SunTrust, it emerges, is a major funder of high-cost auto title lenders, along with pawn and gun shops, in Alabama, Georgia, Virginia, Maryland and Tennessee. ICP has compiled a list, several dozen long -- click here for ICP's new SunTrust Watch.

  Follow the money, question and answer: in the midst of New Mexico's consideration of anti-predatory lending legislation, which two companies each threw $2000 contributions to NM state Sen. Roman Maes? The answer: Ameriquest Capital and Household International Financial PAC...

  Meanwhile, the global lobbyist Citigroup had quite a week: paying off $2.65 billion, supposedly, to atone for its enabling of the WorldCom's fraud, then scooping up for $1.26 billion the mortgage business of Principal Financial (to, if the past is any guide, defraud or nickel and dime yet more consumers). Principal, we've heard, has faced numerous complaints about its servicing; there'll be more. We continue to receive information from those inside or who've just left the company, such as this, from a long-time CitiFinancial employee:

Subj: CitiFinancial
Date: 5/10/04 6:06:46 PM Eastern Daylight Time
From: [name withheld]
To: CitiWatch [at]

I have been perusing your site for a couple of years. I worked for CitiFinancial for 14 years in a number of supervisory capacities... You are pretty much right on the money in assessing the problems at Citi, but there is so much more. You haven't tapped into the management style of the folks at CitiFinancial...that is where the real travesty lie. Upper management is riddled with phony evangelicals ("Do the right thing - first time, all the time.") the likes of Bill Clements, K.C. Mead, a "Managing Director" who was involved in the suicide of one of her region managers shortly after Citi acquired he and she from Transamerica. (Yes, there was a time when Citi was conducting a due diligence of that organization, too. That was just before Citi bought Sec Pac Finance - the financial services arm of BofA at the time.)... You also haven't dug as deeply as you can into the incentives at Citi - everything from the lucrative Chairman's Forum to the bonus structures to the means of promotions. Now, this company has once again bought themselves out of being held accountable - for a mere $2.65M. The dogma of "getting this behind us" is so resonant in my ears. Management touts this ability...don't believe for a moment that it's a lesson learned. It's just a very small fine to pay out of the huge Citi coffer that gets fatter & fatter everyday with the help of the products of the environment - as I myself once was.

We will have more from this correspondent... 

May 10, 2004

  On May 4, it was leaked then announced that Royal Bank of Scotland proposes to acquire Charter One Financial, for $10.5 billion. This is a major proposal, particularly because, unbeknownst to many, RBS' Citizens Mortgage Corporation has loan origination partnerships with subprime lenders, including Option One, Fremont Investment and Loan, and the KeyCorp unit known as Champion ("when you bank says no, Champion says.. yes," as the TV ads have it). Additionally, RBS owns the investment bank Greenwich Capital Markets, which securitizes subprime loans for such lenders as Aames, Accredited, and Delta (including while it was being sued for predatory lending). RBS has been defensive and arrogant about these connections with questionable subprime lenders; now RBS wants to more than double its size in the U.S..

  ICP / Fair Finance Watch sprung into action, preparing a detailed filing and submitting it, on May 10, to federal and state regulators, and to RBS' "home country" regulator, the FSA in London. It may well be that Citizens talks nice in some of its market, may even "do" nice -- but on the key question of safeguards for subprime lending, even the threshold question of transparency about connections with subprime lending, RBS Citizens deserves a failing grade. Click here for more.

  Meanwhile, CitiFinancial has announced plans to open ten new offices in Hong Kong. The newspaper The Standard quotes CitiFinancial's Simon Chow that CitiFinancial's "average interest rate will be over 20 per cent annually." COO Willumstad said, responding to ICP's questions at the Citigroup annual shareholders' meeting on April 20, that the same practices apply outside the US as within... 

May 3, 2004

    Always learning -- a flurry of correspondence that Inner City Press received last week instructed, among other things, that National City Bank of Cleveland funds at least four of the top thirteen payday lenders (NatCity provides the names, while other banks including JP Morgan Chase still try to withhold the names of the payday lenders they fund); that Union Planters refers denied applicants down to its subprime unit Colonial Loan, but has no referral-up process; and that JP Morgan Chase radically mis-reported its deposits, putting false information into the public domain until the Fed closed its comment period on JPM Chase - Bank One. Each is described in brief below. Not from correspondence, but rather from the salt mines of Uniform Commercial Code research, ICP learned (and has commented) that North Fork Bank, intent on acquiring non-prime lender GreenPoint, was the only New York State bank to fund the now-closed check cashier and bill payment fiasco, CashPoint Network. CashPoint has faced suspension orders in New York, Pennsylvania, Rhode Island and other states; that North Fork funded it raises serious questions, on which ICP is demanding public hearings. Never a dull moment...

   Even on the weekends. On Saturday, May 1, ICP received from National City a marked-up copy of NatCity's April 16 submission to the Federal Reserve, responding to questions that were based on ICP's showing of NatCity's support of payday lenders. Asked to name which payday lenders it has relations with, National City states:

"National City has certain subsidiaries, which play a role in financing the business operations of a handful of payday lenders... National City is the agent on CNG Financial (HQ in Cincinnati, OH) (aka Check n' Go)) where National City holds [REDACTED] senior secured credit facility. National City is also agent for Check into Cash (HQ in Cleveland, TN) where it holds [REDACTED] senior secured credit facility."

   National City also names ACE Cash Express and Advance America. ICP has contested each of these redactions. While National City names only four payday lenders, these are among the largest in the industry -- four of the top 13 in the payday lending industry.

   Regions, while continuing to withhold its and Union Planters' list of payday and car title lenders financed, unredacted last week part of its earlier responses, including an admission that Union Planters refers denied applicants to its subprime affiliate Colonial Loan, Banks' April 22 Submission at 6, while "Colonial Loan does not have any policies and procedures in place to refer applicants for subprime loans who would qualify for prime loans to UPBNA or other affiliated Union Planters entities," id. at 8 -- This one-way street is, in context, a "worst practice" on which the FRB must act, including by granting ICP's hearing request and denying, on the current record, Regions' application. ICP's supplemental comments further note and contest that even in the April 27 version, Colonial Loan's subprime volume is being withheld...

    While JP Morgan Chase continues to withhold the list of the subprime and payday lenders it funds, and while JPMC CEO Harrison continues to refuse to comment on the payday lending issues (while, paradoxically, claiming to environmental groups to be transparent), JPMC last week turned in a more than 100-page submission, which made some extraordinary admissions. A copy was sent to ICP and to only one other commenter (ostensibly because it dealt with antitrust). The submission, dated April 29, admits at pages 2 through 4 that "certain of the deposit data that JPMC used to prepare its SOD report for June 30, 2003 reflected deposits as of the close of business on June 27, 2003... The use of the June 27, 2003 deposit data from the NDS had an impact on the amount of deposits reported for almost every branch in the Bank's June 30, 2003 SOD report... Since learning of these errors, JPMC filed a corrected SOD report" with the FDIC. But even this first correction was incorrect, and subsequently amended. The result has been that, due to JPMC's misstatements, during the comment period the public did not have access to the accurate figures. It is imperative that the comment period be re-opened, ICP has now commented.

    Similarly, JPMC now admits miscoding "accounts of certain high net worth individuals" and miscoding "deposits that were initially booked at the Plano, Texas office and subsequently moved to the 270 Park Avenue, New York City offices." Material portions of these admissions are redacted; ICP has demanded that information, as well as the subprime and payday lending list, which contains information that Chase's and Bank One's peer, National City, has just released to ICP. Chase has worst practices, including "least transparent practices."

   Finally for this week, the hypocrisy of the world's largest bank: Citi and the predators -- it's not limited to mortgages, or even to CitiFinancial. A recent connection is Citi's decision to be underwriter and book runner for a major stock offering by Dollar Financial Group, another other things a nationwide check cashier (mostly under the Money Mart brand name), and a payday lender subject to class actions for usury. Dollar settled such a class action in California, in 2001. Doesn't bother Citigroup -- Dollar Financial's books are stored at Citigroup in the Brooklyn Army Terminal, 8th floor of 140 58th Street... The OCC has reached a formal finding that "Dollar Financial actively promotes loan rollovers, creating "a misuse of the loan product for long-term credit." Citigroup's lead bank is the OCC-supervised Citibank, N.A....

April 26, 2004

   Some standardless banks' involvement with check cashiers and payday lenders, pawnshops and rent-to-own, continues to go unacted upon by the Federal Reserve and the other regulators. Following a second volley of exhibits submitted to the Fed on April 23, in connection with its Chicago hearing on JPM Chase - Bank One, ICP/Fair Finance Watch on April 26 filed comments with the Fed, FDIC and New York Banking Department on another pending merger, the $6 billion proposed combination of North Fork Bank with GreenPoint (which is a nationwide subprime lender in denial: they call what they do "non-conforming," sort of like the dead are "non-living").

   Beyond lending disparities and redlining -- North Fork while opening a score of branches in Manhattan has none in Harlem, and none in Community Planning Districts 1,2, 3 or 4 of the South Bronx, which GreenPoint also excludes -- ICP has presented New York Uniform Commercial Code filings showing North Fork Bank's relationship with the South Bronx's D & R Check Cashing Corp. at 535A Southern Boulevard in the Bronx. This is a low-low-income neighborhood which suffering from lack of banking service, and which North Fork and GreenPoint have strikingly avoided in their branching. ICP has also submitted UCC filings showing North Fork Bank's relationship with David's Money Centers of Rockland, LLC, of 3015 Third Avenue in the South Bronx; Rite Check Cashing Inc. of 2591 Westchester Avenue, Bronx, New York 10467; Eastchester Check Cashing Inc. of 2046A Eastchester Road, Bronx, NY 10461, etc. (including, in Brooklyn, Parente Check Cashing Corp. of 593 Myrtle Avenue).

   An even more recent NY UCC filing submitted by ICP shows North Fork Bank's financing of Empire Pawn Brokers, Inc., with North Fork taking an interest in "accounts receivable including proceeds and products." North Fork does this out-of-state as well: for example, as evidenced by a Colorado Secretary of State UCC filing ICP has submitted showing that North Fork has lent to Ashley's Aurora Towing and Pawn Co. of 2261 S. Wabash, Denver, Colorado. Hitting the trifecta of fringe finance, North Fork Bank (and North Fork Bank & Trust Co. before it) finances Rent To Own, Inc. of 146 West Main Street, Bay Shore, New York.

   North Fork's funding of fringe finance is all the more cynical given its high denial rates for, and exclusion of, African Americans and Latinos. ICP's filings show that in 2002, the most recent year for which data is available, in the New York City Metropolitan Statistical Area (MSA), for conventional home purchase loans, North Fork denied loan applications from African Americans 2.87 times more frequently than applications from whites, and denied Latinos 2.15 times more frequently than whites. This is worse than other lenders in New York: the denial rate disparities for the industry as a whole in 2002 were 1.89 for African Americans, and 1.68 for Latinos. For mortgage refinance loans, North Fork was even more disparate, denying applications from African Americans a whopping 6.8 times more frequently than applications from whites.

  North Fork is the applicant (and proposed acquirer) here, so ICP has first reviewed North Fork's 2002 HMDA and CRA records. Even on its Long Island base, North Fork strikingly underserves people of color. In the Long Island MSA in 2002, North Fork made 172 conventional home purchase loans to whites, only FOUR to Latinos, and only EIGHT to African Americans. For these three groups, the aggregate made 5.8% of its loans to African Americans, and 9.4% to Latinos. For North Fork, the figures were much lower: only 4.3% of loans to African Americans, and only 2.2% to Latinos.

  For refinance loans in the Long Island MSA in 2002, North Fork was even more disparate, denying applications from African Americans 2.51 times more frequently than applications from whites. This disparity is compounded by lack of marketing and exclusion of communities of color: in the Long Island MSA in 2002, North Fork made 443 refinance loans to whites, only 17 to Latinos, and only 10 to African Americans. For these three groups, the aggregate made 5.8% of its loans to African Americans, and 6.3% to Latinos. For North Fork, the figures were much lower: only 2.1% of refinance loans to African Americans, and only 3.6% to Latinos. North Fork is a redliner.

   Looked at county-by-county, North Fork's mortgage lending record is even more troubling. While North Fork controls $593 million in Bronx deposits, North Fork originated only 37 HMDA-reported loans in The Bronx in 2002. Only two of these mortgage loans were to African Americans, and only four were to Latinos (23 were to whites, in a county that is far more Latino, and African American, than white). For the Latino majority in The Bronx, North Fork reports four originations and three denials; for whites, 23 originations and only two denials. This pattern calls for a fair lending enforcement action, as well as for denial of North Fork's expansion applications.

   While North Fork controls $502 million in Brooklyn deposits, North Fork originated 117 HMDA-reported loans in Brooklyn in 2002, only 12 of which were to African Americans, and only seven of which were to Latinos (64 were to whites). For African Americans in Brooklyn, North Fork reports 12 originations and seven denials; for whites, 64 originations and eight denials. In Manhattan, North Fork made 493 loans to whites in 2002, and only FOUR to African Americans (and only 12 to Latinos). In Queens, North Fork made 121 loans to whites in 2002, and only 20 to African Americans (and only 29 to Latinos). For African Americans in Queens, North Fork reports 20 originations and 14 denials; for whites, 121 originations and 18 denials. While North Fork controls $400 million in Westchester deposits, North Fork originated 109 HMDA-reported loans in Westchester in 2002, only five of which were to African Americans, and only four of which were to Latinos (80 were to whites). For African Americans in Westchester, North Fork reports five originations and more -- eight -- denials; for whites, 80 originations and six denials. This pattern calls for a fair lending enforcement action, as well as for denial of North Fork's expansion applications.

   Anticipating what has become North Fork's defense, or evasion: business lending does not make up for these outrageous disparities. Not only does North Fork's business lending include enabling check cashiers, rent-to-own business pawnshops (see supra and attached) -- also, of North Fork's $593 million of Bronx deposits, North Fork lent less than $12 million in 2002 to Bronx small businesses -- generously defined as those with annual sales of or below $1 million. This 1.92 percent rate of reinvestment of deposits as small business loans was the lowest percent for North Fork in any NYC county: in more affluent Manhattan, North Fork's reinvestment percentage was 2.51; in Nassau County it was 2.74%. North Fork redlines lower-income communities -- most strikingly the lowest income, most predominantly of-color county in New York, The Bronx. North Fork's patterns call for a fair lending enforcement action, as well as for denial of North Fork's expansion applications.

   While the focus is on North Fork, as applicant and prospective acquirer, it must be noted that North Fork has little experience in New York mortgage lending, and none in nationwide mortgage lending, much less in subprime mortgage lending as engaged in by GreenPoint. ICP has reviewed the nationwide mortgage lending record of GreenPoint Mortgage Funding, Inc., and finds for example that in the Buffalo MSA in 2002, for conventional home purchase loans, GreenPoint Mortgage Funding Inc. denied the applications of African Americans 3.2 times more frequently that whites, while also having a higher percentage of applications listed as "withdrawn" for African Americans than for whites. This strangely high percentage of "withdrawn" applications, particularly for people of color, is systemic in GreenPoint Mortgage Funding's 2002 conventional home purchase HMDA data, for example in Atlanta (171 of African Americans' 851 applications listed as "withdrawn"); Chicago (90 of Latinos' 374 applications listed as "withdrawn"); Los Angeles (155 of Latinos' 937 applications listed as "withdrawn"); and Philadelphia (47 of African Americans' 215 applications listed as "withdrawn"). Also in Philadelphia in 2002, GreenPoint Mortgage Funding denied the conventional home purchase applications of African Americans 2.46 times more frequently than whites.

   As readers of Inner City Press may remember, GreenPoint fought tooth and nail, including in Federal Court with ICP, against including The Bronx in its service area (ICP temporarily obtained a court injunction against GreenPoint's expansion; GreenPoint CEO Tom Johnson responded with an affidavit claiming that the ATM machines of the branches to be acquired had already been changed, and there was no going back -- and that GreenPoint would serve the Bronx in the future). Well, now GreenPoint still has no branches in the South Bronx, which is half of the borough, geographically and by population.

   Here is a portion of an e-mail ICP received from a whistle-blower within GreenPoint Mortgage Funding Inc. --

Subj: GreenPoint Mortgage / Progeon / Infosys / Outsourcing

From: [E-mail address available on request to governmental authorities with whistleblower protections]

To: FairFinanceWatch [at]

...Did you know that GreenPoint Mortgage will soon make any borrower's private information accessible in India ? Scary.

...GreenPoint Mortgage, a mortgage banker based in Novato, CA, with parent in NY state, and a subsidiary of Infosys of Bangalore India called Progeon are about to "outsource" loan servicing and customer service to Bangalore, India. This will not be disclosed to US borrowers, who will be led to believe that their information is still being serviced and accessed domestically at the Santa Rosa, CA and Columbus, GA servicing centers. Needless to say, this is a bit deceptive.

US lenders are under Gramm-Leach-Bliley Act privacy rules under the FTC and eight other enforcement agencies, also one called the Safeguard Rule the FTC is supposed to enforce. This is all a big joke, since foreign "affiliates" of the US company have more powers than the US company when it comes to accessing the private information of customers/clients/borrowers!

Now GreenPoint Mortgage, as a mortgage banker that buys and sells loans across the US, is about to make ANY US BORROWER'S personal financial information accessible in India, since theoretically any loan could be sold to GreenPoint ! By the way, the Indian companies are outside of Gramm-Leach-Bliley Act jurisdiction. Infosys is 20% owned by Citigroup, which is partly why this project is being rushed through without any oversight from the governmental entities, including the FBI and the other "proactive" security agencies: Homeland Security Dept isn't even up and running yet and the foreign entities that can exploit this data gold mine have access already. A recent article on Indian madrassahs like the one at Deobandi beg the question "how will these foreign affiliates protect American borrowers information" ? Especially since they are outside US jurisdiction and scoff at GLBA compliance!

    ICP's comments conclude: this proposed merger would result in the closing of 15 or more branches (according to North Fork's application to the FDIC), the locations of which haven't even been disclosed. ICP's comments conclude: the comment period must be extended, fair lending enforcement actions should begin, and the applications should be denied. This will be updated.

* * *

CRArcane™ -- along with commenting to the OCC on HSBC's attempt to move its headquarters from New York State to Delaware, and to preempt all state consumer laws with a national bank, ICP also commented on the OCC's weak proposal to require national banks to annual list their operating subsidiaries and "lines of business" -- at a minimum, ICP's comments says, the disclosure should include whether or not the op sub is involved in subprime lending, and dollar volume of such business, as well as increased disclosure of applications to form or enlarge op-subs (as HSBC could shift Household International into a national bank op-sub, evading the state regulators to which it made its limited commitments in late 2002). We'll see...

April 19, 2004

   There will be CRA action this week in the run-up to the Federal Reserve's April 23 second public hearing on the proposed JPM Chase - Bank One merger. JPM Chase's vague 11th hour pledge, announced or rather mumbled by Chase CEO Bill Harrison on April 15, has hardly resolved the issues. Not only does the pledge leave unaddressed Bank One's and Chase's support for payday lenders and pawnshops, and predatory lenders -- even by its own terms, it seeks to include high-rate subprime mortgages and mortgages that are not relevant under the Community Reinvestment Act. It includes loans to individuals and in areas "at or below median income" -- that is, middle income. In order to come up with a number larger than Bank of America's $750 billion, JPM Chase decided to include everything but the kitchen sink, including subprime mortgages and mortgages to affluent individuals in middle income areas. For shame...

   On April 19, ICP submitted supplemental comments to the Fed, noting among other things that while on March 11 the Fed asked the banks about their relationships with payday lenders, thus far the FRB has asked no questions about, for example, support for pawn shops, which like payday lenders and check cashiers are part of the fringe banking system which JPM Chase and Bank One are supporting and profiting from. ICP has demanded that the Fed now ask JPM Chase and Bank One about their support of pawnshops, including due diligence, standards, etc., by the same logic of the Fed's March 11 payday lending-related request and other recent requests -- for example, the Fed on April 1, following an ICP submission of UCC filings, asked Regions Financial and Union Planters Corporation about their relationships with car title lenders. (ICP has shown connections to Community Loans of America, more fully reported in ICP's Bank Beat Report). Car title lenders are alternatively known as title PAWN lenders, because in essence the consumer is pawning his or her car. Pawning is a financial transaction -- often a predatory one -- and there is no basis for not now asking Bank One and JPM Chase about relationships with pawn and gun shops, and check cashiers. The responses should be made public and comment allowed thereon, in an extended comment period. As ICP and numerous other witnesses stated on April 15 (and as ICP has formally asserted, including in its April 14 FOIA appeal), the withheld lists of JPM Chase's and Bank One's subprime and payday relationships should be released, before the April 23 public meeting, and before the comment period can close. This is also true in light of JPM Chase's and Bank One's eleventh hour, still-vague pledge, which does nothing to address the subprime, payday and pawnshop lending issues which ICP has raised since its first comment, issues which continue to develop...

   On the question of payday lending (and pawn & gun shops), squarely raised by ICP's comment and exhibits, the American Banker of April 16 quotes a Bank One spokesman that "' "We have ethical standards for all the companies we do business with and we think we have adequate standards today.' A spokesman for JP Morgan referred questions on payday lending to Bank One." But the Columbus (Ohio) Dispatch of April 15 reported:

"Bank One is aware of concerns about the type of businesses that Inner City Press cited and has a "small number of lending relationships" with those firms, spokesman Jeff Lyttle said. 'We require our customers to comply with the law,' he said. 'If they comply with the law, we do business with them.'"

  So that's these two banks' standards -- anything that's not illegal is fine with them. That's a long way from "best practices," and from the standards that JPM Chase claims to have. Even Alan Greenspan distinguishes between violations of trust and "even" legality -- to the Atlanta Fed's South Sea Island, Georgia conference last week, Greenspan said that "recent allegations on Wall Street of breaches of trust or even legality, if true, could begin to undermine the very basis on which the world's greatest financial markets thrive... Guilty parties should be expeditiously punished.'' We'll see...

   Speaking of Predatory (this time, Bender), ICP's book appeared last week in the Times of London, where it's described as having "a cast of colorful characters, not least Sandy Vyle, chairman of EmpiGroup, the world's largest bank. Vyle is a foul-mouthed monster, determined to screw the best terms out of his so-called customers. Under no circumstances is Vyle to be confused with Sandy Weill, chairman of Citigroup, the non-fictional world's biggest bank. 'This is a creative work. Resemblances to non-public figures, locales or institutions are coincidental,' goes the blurb."

April 12, 2004

   Late on April 9, the Federal Reserve released its agenda and witness list for the April 15 public hearing on JPM Chase - Bank One. Witnesses, ostensibly one per organization, were told in a cover letter to limit their remarks to five minutes, "due to the number of speakers and panels that will be participating in the proceedings." But a comparison of the witness list with JPM Chase's own list of its self-selected Community Advisory Board (CAB) shows that JPM Chase has stacked the witness list with members of its CAB, many of whom work for organizations that are funded by JPM Chase. Fully 22 of the witnesses are on JPM Chase's CAB -- so, adding only these and Chase's two "official" witnesses, two hours of testimony will be Chase's.

     Beyond the 22 Chase CAB members -- simply for example, all five witnesses on Panel Ten are on Chase's CAB -- number other witnesses either work for organizations funded by Chase, or seem only tangentially related to considering the proposed mergers affects on CRA performance and service to low-income consumers, including the predatory and payday lending issues that have arisen. There's a witness who's affiliation is listed as "C-Town Supermarket / NSA" (C-Town is a for-profit supermarket chain); there's a lawyer with the for-profit firm of Godwin Gruber, LLP. Witnesses are flying -- or being flown -- in from Florida, Ohio and Texas.

   To be clear: no one, at least not ICP, disputes that Chase has provided support to certain non-profit organizations. That's not in dispute. Since Chase has chosen to call in these favors, with the effect of limiting the time available to more independent and critical witnesses, it will have to be asked, at the hearing, whether those supporting JPM Chase are, in fact, endorsing payday lending, pawnshops, and the rent-to-own and check cashing businesses that JPM Chase supports, in inner city areas. This will be asked, too, at the Delaware public hearing on the proposed merger, on April 13 -- which we'll report on here mid-week, watch this site...

* * *

   Did he jump or was he pushed? Last week, Household's shifty CFO Dave Schoenholz announced he's leaving HSBC / Household; no reason was given. But the Financial Times, noting like week that in the UK, APRs at HFC range from 12.9 per cent to 29.9 per cent, reported that " David Schoenholz, Household's chief operating officer, said he saw 'huge opportunities' for growth in the UK targeting consumers that HSBC had to turn down for credit in the past because it did not have the right processes." So why is Dave the Shone turning away from those "huge opportunities"? Meanwhile, in revolving door news, the Office of the Comptroller of the Currency's David Gibbons left government employment, directly to HSBC - Household. There ought to be a law...Even more outrageous (because the switch is from being the OCC's regulator of a bank to the bank's employ), the American Banker of April 6 reported without comment that "LaSalle Bank Corp. of Chicago announced last week that it had hired Leonard Wiatr as its chief compliance officer. He was the OCC's examiner in charge at the ABN Amro Holding NV subsidiary." Outrageous!

    Also on Household, and its still-predatory lending: on April 13, Inner City Press has scheduled a deposition of one of the Delaware officials who withheld information about Household as HSBC acquired it. Litigation is slow, but it is being pursued.  Developing... 

April 5, 2004

    CRA, from high to low (and we do mean, "low," for example a bank funding a payday and car title lenders widely reported by to Mafia connected). First, the ether:

  The agencies' proposed amendment to the CRA regulation, including raising the definition of "small bank" up to $500 million, are open for comment through April 6. ICP has filed its comments, noting among other things that the FDIC's associate director Steve Fritts, at a recent conference of the payday lenders' trade association CFSA, stated that the banks currently making payday loans have average assets of $300 million -- that is, the size of bank that would be removed from meaningful CRA scrutiny under the agencies' regulatory proposal (which claims to acknowledge and act on predatory lending). Meanwhile, seven congressmen, including Spencer Bachus (R-Alabama) have written to the regulators urging that the definition of small bank be raised to $1 billion in assets. The March 17 letter had six other signatories -- we mention Rep. Bachus because the Birmingham Post Herald of March 31, reporting on ICP's challenge to Regions - Union Planters, quotes Bachus: "I think they have had an exemplary record under CRA (Community Reinvestment Act)," said U.S. Rep. Spencer Bachus, R-Vestavia Hills, chairman of the House Financial Services subcommittee on financial institutions and consumer credit. Bachus said the merger is good for Birmingham because it will mean Regions will continue to be based here."

   An issue in ICP's challenge is Union Planters' funding of the payday and car title lender Community Loans of America. Rep. Bachus, it is reported, spoke at the payday lenders' trade association conference and trumpeted that he will "oppose any moves to block payday lending through regulatory agencies. In the keynote address, Bachus pointed out that bank fees for several bounced checks can add up to hundreds of dollars. 'I don’t hear any criticism of that,' he said." Then he's not listening: ICP and others criticize that, too. But the payday and car title lending industries have issues that are, shall we say, unique. ICP has filed a supplement on Union Planters-Regions, noting that UP-funded Community Loans of America (and its predecessor Title Loans of America) have been and are 50% owned by an individual who has been barred by gambling commissions in such states as New Jersey and Nevada for having organized crime connections. ICP has submitted to the Federal Reserve (and would happily forward to Rep. Bachus) evidence, including the pertinent portions of sworn deposition testimony, of Alvin Malnik's ownership interest in Title Loans of America (which was renamed Community Loans of America when it sought to branch out from car title loans into payday lending). See also, The Oregonian of JUNE 24, 2000, "FIRM LINKED TO REPUTED MOB FIGURE GOT LOANS"

"Alvin Malnik, a Boca Raton, Fla., lawyer and investor, is the beneficiary of two trusts that hold 100 percent of the stock of Title Loans of America, the nation's largest title-lending chain, according to Don Tucker, a Title Loans lobbyist in Florida. The company is part of a burgeoning car-pawning business that has drawn fire nationally from consumer groups for charging interest rates as high as 300 percent.
"The New Jersey Casino Control Commission denied Malnik a casino license in 1980, citing, among other things, his long association with mob financier Meyer Lansky. The commission ruled that Malnik was "a person of unsuitable character and unsuitable reputation." And in 1993 the commission disciplined two Atlantic City casinos for allowing Malnik to set foot in them.... the New Jersey Casino Control Commission denied a license to two Malnik business associates in substantial part because of their association with Malnik. In doing so, the commission noted 'the evidence establishes that Mr. Malnik associated with persons in organized criminal activities, and that he himself participated in transactions that were clearly illegitimate and illegal.'"

  These matters, ICP's comments state, raise substantial adverse issues under the managerial resources and other BHC Act factors, and also in terms of reputational harm, as construed in the Basel Accord and otherwise...As to Rep. Bachus, his recent CFSA speech was hardly his first support for payday lenders. US Banker of March 2002 reported, now ironically, that "Bachus makes the ridiculous, but much-used argument, that 'the,,,, regulatory approach in this area risks shutting off a critical source of credit to consumers who have few, if any, alternatives in trying to meet their short-term financial needs'... We suspect he'd make the same argument favoring the loan-sharking activities of the Mafia." US Banker said that two years ago -- and now, organized crime and payday lending is at issue in Union Planters - Regions....

  As we've reported for weeks, JP Morgan Chase and Bank One, confronted with evidence of their funding of payday lenders and rent-to-own stores, have essentially said, "So what?" and that they'll continue the business. The Federal Reserve asked about this, and other matter; JPM Chase has confined the list of subprime lenders it enables to supposedly confidential exhibits -- which ICP is pursuing, in the run-up to the Fed's public meetings on the proposed merger.

March 29, 2004

    Ah, payday lending. Another of the pending mergers -- Regions to buy Union Planters, for $6 billion -- also raises the issues, in that Union Planters funds and enables the payday / car title lender Community Loans of America. There's CRA too: Regions received a too-rare Needs to Improve CRA rating under the investment test in two of its markets, as did Union Planters in two entire states. Regions' bank and mortgage company disproportionately exclude African American and Latino applicants from their normal interest rate loans, while Regions' subprime lending unit, Equifirst, targets these same groups for higher-cost loans (ICP's just-submitted analysis is here).

   In other payday-related news, comments have gone in opposing a proposal by County Bank, notorious charter-renter, to form a bank holding company. Also, on March 26 the Federal Reserve finally gave in to the many requests for public hearings on JPM Chase's applications to buy the admitted payday lender-funder Bank One, and agreed to hold two meetings: April 15 in New York City and April 23 in Chicago. The announcement came 11 days after the Fed closed the comment period, and one day after an article in the American Banker newspaper reported that "as of Wednesday 95 comment letters on the Bank On deal, most of them negative, had poured into the Fed since J.P Morgan Chase submitted its application," and quoted ICP as " flabbergast[ed]... What is the standard?"

   JPM Chase on March 26 claimed to the New York Banking Department, in response to ICP's comments to the NYBD, that it is foreclosing on only 4.43% of its subprime loans in Philadelphia (a market ICP has analyzed) -- but then discloses, in a footnote, that "data do not include cases where a JPMC affiliate acts as trustee of a securitization but CMMC is not servicing the loan." But it's the trustee who forecloses...

  Now that the Fed hearings have been scheduled, ICP has put in a formal request to JPM Chase for its 2003 mortgage lending data, broken down into subprime and prime, and for information about "safeguards, if any, for purchasing, securitizing and otherwise enabling (including through warehouse lending) other subprime lenders." Bank One's enabling of payday lenders will also be explored...

   In preemption news, Household's owner HSBC now proposes to shift to an OCC charter, and to move its U.S. headquarters out of New York, to Delaware. The latter should perhaps not surprise: Delaware's insurance commissioner bent over backwards to approve HSBC's acquisition of the predatory Household, and is now in court for its withholding of HSBC-related documents under the Freedom of Information Act. It's not like the New York Banking Board didn't also cave in to HSBC: documents ICP received last week from the NYBD show that the NYBB was provided with less than twenty pages about HSBC's Bank of Bermuda proposal, including virtually none of the predatory lending issues which arose. Even that laxity was not enough for HSBC: they want preemption, they want deregulation, they represent the worst of corporate globalization, for example with their export of predatory lending.

March 22, 2004

   With the regulators showing ever-more weakness or disinterest, the predators are emboldened. Case in point: the Federal Reserve allowed the comment period on JPM Chase - Bank One to expire without scheduling public hearings, despite evidence of JPM Chase's lack of standards, and of Bank One's support of a half-dozen payday lenders. The following day, the Federal Reserve Bank of Philadelphia mailed Inner City Press a copy of the application by rogue payday lender County Bank to form -- what else? -- a bank holding company. Why not? The Fed seems to accept anything. Witness the Fed's approval of Bank of America - Fleet, despite Parmalat, mutual fund and other issues resulting, days after the approval, in a $675 million fine against the banks. A working hypothesis is that to the Fed, size matter: mega-banks get favors.

    On March 22, ICP / Fair Finance Watch filed with the Cleveland Fed a detailed challenge to National City's $2.1 billion proposal to buy Provident Bank -- including documentation of NatCity's support of payday lenders, Provident's warehouse funding of predatory lenders, etc. It's covered in this week's ICP Bank Beat (click here to view); it will be updated on this site. As will County Bank: it's application blandly states that

"The Board of Directors of County Bank has determined that the Bank should be reorganized into the holding company form of ownership structure...The reorganization would permit CB Financial to diversify operations and better serve the needs and convenience of the community while helping to safeguard the Bank's operation in accordance with safety and soundness requirements. The holding company structure provides flexibility in terms of corporation organization and capital formation... The reorganization will not appreciably affect the strategic plan or lines of business of the Bank and the Bank's record of service to the community is expected to remain intact."

  This is followed by a 14 page merger agreement (of the Bank with a shell), and an FFIEC report of condition and income. It appears that nowhere in the application does the word "payday loan" or "cash advance" even appear. In fact, County Bank's web site does not mention the issue -- it sticks to the story of County's focus on southern Delaware -- but a fast Internet search turns up a March 6 report that " Cash Today uses loans by the County Bank of Rehoboth Beach, Del., to make payday loans in Pennsylvania," Check n' Go's statement that " North Carolina loans made by County Bank of Rehoboth Beach," and governmental lawsuits, including in New York (click here for a PDF of the complaint). The Federal Reserve's comment period runs, appropriately it seems, through April Fool's Day... 

March 15, 2004

   On Capitol Hill last week, the evolution of predatory lending into a buzzword was on display. In the Dirksen Senate Office Building, four senators and an equal number of Reps denounced predatory lending. The junior senator from New York, her speech quickly deemed the keynote, criticized both predatory lending and the agencies' proposed amendments to the Community Reinvestment Act regulations -- including a proposal to make public census tract-by-tract small business lending data (rather than the current reporting by income-tranches of census tracts). To the surprise of most of the community advocates in the audience -- it was NCRC's annual conference -- Sen. Clinton said that this increased data reporting would be "very burdensome." After announcing, as a trope, that "I like rich people," Sen. Clinton swept out of the room, leaving in her wake the question of whether she'd misspoken, or misunderstood that aspect of the proposed amendments to the CRA regulation, the one part that most community and consumers' organizations favor. It was reported that the issue, prior to Sen. Clinton's remarks, had been explained in detail to Clinton staffer Anil Kakani, who confirmed that this was Sen. Clinton's position: that more detailed reporting of small business lending data would be a burden on the banks. "Another senator from Wall Street," an audience member remarked. (New York's senior senator has been asked to comment, as his Senator colleagues in other states have on other mergers, on JP Morgan Chase's proposal to acquire Bank One. At press time, his response was not known).

   The one and only Independent Rep in either house of Congress denounced the chairman of Citigroup, saying he's paid himself $500 million in the last five years, and that Capital One's management is not far behind. We'll have more on both companies in the coming weeks -- this week, ICP/Fair Finance Watch filed a timely request for reconsideration to the Federal Reserve on Bank of America - Fleet, and another timely comment to the Fed opposing JPM Chase - Bank One. On that, numerous requests for extension and for public hearings went in. Meanwhile, JPM Chase's executive vice president Mark Willis took questions at the Hyatt Regency on Capitol Hill, at a session on predatory lending at NCRC's annual conference. When asked if the standards which Chase claims for its own subprime lending are extended to the subprime lenders for which JPM Chase securitizes, acts as trustee, and to which it makes warehouse loans, Mr. Willis said that he wasn't sure, but that it is "a good question," one that he will look into and then definitively answer. The interim answer was that JPM Chase aspires to and/or claims to have achieved such consistency in practices -- a proposition that was immediately met with skepticism, by interlocutor and audience. Among the inconsistencies are the imposition of mandatory arbitration by subprime lenders JPM Chase works with, their use of five year prepayment penalties, YSPs and other matters. At press time, it is unclear if and when the Federal Reserve will hold the multiply-requested public hearings. But there and/or elsewhere, the issues will be pursued... 

March 8, 2004

   The scourge of payday lending is often ascribed to small fry in storefront in strip malls, and to some relatively small banks which rent out their charters (and powers to preempt and to export usury caps). But the enablers of payday lending include the largest banks in the country-- in this case, the second and sixth largest, Bank One and JP Morgan Chase, which are proposing to merge.

   Last month in this space, Inner City Press began reporting on Bank One's relationships with the ten-state payday lender First American Cash Advance. In response, Bank One and JPM Chase acknowledged the relationships (it was impossible not to, given that Inner City Press had obtained and disseminated Uniform Commercial Code filings). But very quickly, the two banks clammed up, and refused to identify any other payday lenders with which they do business, muttering "it's none of your business."

   But it is the public's business, and a matter of public record (if one digs deep enough). As exhibits to a March 8 filing with the Federal Reserve, Inner City Press has included documentation of:

--an August 14, 2002, UCC filing showing Bank One's relationship with Instant Cash Advance Inc. -- the publication Dollars & Sense of March 1, 2003, reviews

"the loan application at a franchise called 'Instant Cash Advance: Chicago's answer for fast cash.' Applicants are asked to sign a pledge in fine print at the bottom of the page, effectively signing away their consumer rights in three ways:
* The applicant is pegged for direct mail and other marketing schemes including possible mail fraud and identity theft: I fully release all parties, companies their subsidiaries & employees, pastor present, from any and all liability for any damage that may result. My signature below indicates that for purposes of verification and qualification, I have voluntarily waived the protection of all rights to privacy laws.
* The applicant forfeits the ability to fight back if ripped off: Furthermore, I also voluntarily waive my right to pursue or take any legal action against Instant Cash Advance, employees past or present, subsidiaries or agents thereof.
* The applicant, not likely to fully understand what he or she is getting into, hammers a nail into his or her financial coffin: I fully understand that any information I provide found to be false or fabricated will be grounds for denial of credit with Instant Cash Advance. I agree that I have fully read this statement."

--an Ohio UCC filing, dated January 21, 2003, showing Bank One's relationship with Sunset Cash Advance Corp., 611 Bellefontaine Ave., Marion, Ohio (the Marion Star of February 4, 2003, reports that Sunset Cash Advance has at least seven payday lending branches in Ohio, and that it "is a division of Showplace Inc., a rent-to-own company and provider of home furnishings, electronics, appliances, jewelry and computers. The home office is located at 611 Bellefontaine Ave. );

--an Ohio UCC filing showing Bank One's relationship with EZ Cash Advance, 800 E. Walnut, Columbus, Ohio;

--another Ohio UCC filing showing Bank One's relationship with Cash Till Payday Ltd., and Always Payday, both of Columbus, Ohio;

--an Illinois UCC filing dated July 16, 2001, showing Bank One's relationship with Illinois Payday Loans, Inc. -- through Bank One in Mesa, Arizona;

--two Colorado UCC filings showing Bank One's relationship with Discount Payday Loans, in Colorado;

--a Kentucky UCC filing showing Bank One's relationship with Mister Payday of Kentucky, Inc.; and

--a Texas UCC filing show JPM Chase's relationship with E-Z Living Rent-to-Own.

   Also regarding JPM Chase, ICP has submitted a representative review of recent foreclosure filings in Philadelphia, highlighting JPM Chase's many foreclosure, including as trustee on subprime loans serviced by the much-sued Fairbanks. ICP has reiterated its call for multiple public hearings, including in Ohio and Texas, and will be beating that drum this week in Washington DC (where NCRC's annual conference is being held) and elsewhere.

   Meanwhile, as levity, the sneaky subprime lender Ameriquest is bidding on the naming rights to Texas' (now-called) "Ballpark in Arlington," which was built with taxpayer money (the bonds are still being paid off). When Ameriquest officials visited Arlington recently, a banner went up, proclaiming it "Ameriquest Ballpark in Arlington." Rangers spokesman John Blake claimed that the hanging of the banner was "just a marketing presentation." This is often Ameriquest's customers' experience: they're led to believe that the interest rate and fees are lower than they in fact are. If Ameriquest wins the stadium naming rights, for transparency's sake the permanent banner or sign should read, "Loan Shark Park." Has a nice ring to it...

   More seriously, Inner City Press has begun receiving from the Maryland Office of Financial Regulation documents responsive to ICP's Freedom of Information request regarding CitiFinancial's hiring of the agency's commissioner, Mary Louise Preis, late last year. Among the documents provided are numerous letters on behalf of Ms. Preis, as Commissioner, ruling against or smoothing over complaints against CitiFinancial. There's even a letter that then-Commissioner Preis sent to the Baltimore City Council replying to the Council's request for an investigation of CitiFinancial -- Ms. Preis responded that no penalties were assessed, since Citigroup had announced (yet again) that it was "changing some of its practices." That Citigroup soon thereafter hired Ms. Preis reveals a blatant conflict of interest and corruption of the public process -- the kind that Citigroup brings to many fields (for example, anti-money laundering, where Citi hired the Federal Reserve's money laundering "guru" Richard Small, after being shows as, but suffering few penalties for, laundering. The Maryland Office of Financial Regulation documents have numerous redactions -- that is, whole paragraphs obscured with magic marker -- predatory lending related information which we'll be pursuing, down in the Washington-Baltimore area and elsewhere...

March 1, 2004

   This week: predatory lending, from the GAO's generalities to the nitty-gritty -- in this case, JP Morgan Chase - Bank One. The General Accounting Office's new study of predatory lending moves the ball forward, at least slightly. It acknowledges that the securitization process, which has pumped some of the worst predatory lenders, has downsides for consumers, for example "it can also provide a source of funds for unscrupulous originators that quickly sell off loans with predatory terms. The secondary market can complicate efforts to eliminate predatory lending by separating ownership of a loan from its originator. This separation can undermine incentives to reduce risk in lending and create incentives that may increase the attractiveness of making loans with predatory terms." It's obvious, but it needed saying.

   The question is, who's listening? In a March 1 filing to the Federal Reserve, Inner City Press documents JPM Chase's enabling of Centex, Household / Decision One, First Franklin and NovaStar -- a lender recently subject to fines and a cease-and-desist order for "unauthorized mortgage broker activity." JPM Chase, meanwhile, has begun submitting responses, evasive on subprime issues (and not yet even addressing the payday lending issues ICP has raised). Chase's response to ICP's comments tries to get the Federal Reserve to rely on the Office of Thrift Supervision's conflicted approval of Chase FSB -- conflicted because the OTS had begun counting Chase FSB's assessment fees in the OTS's budget even while the challenged application was pending! On that, Inner City Press last week wrote to the OTS challenging the agency's claim that its budget is "not a public document and is not publicly disclosed or shared with other government bureaus or offices." ICP has directed the OTS to the U.S. Constitution, Article I, Section 9, Clause 7 of which provides that "a regular Statement and Account of the Receipt and Expenditures of all public Money shall be published from time to time." ICP's filing with the OTS refers to the comment deadline on the agencies' proposal to amend the CRA regulation; there may be a need to litigate the issue before then. Other issues as well...

   Speaking of predatory, here's what was at issue in the recent Oregon jury verdict against HSBC's Beneficial, Vasquez-Lopez v. Beneficial Oregon, Inc. -- Panfilo Vasquez-Lopez and his wife Maria Dominguez, who speak little English and have difficulty reading and writing Spanish, had a first mortgage at seven percent interest. Needing money to fix their roof, they refinanced their home through a Beneficial agent who spoke Spanish, and who promised them that the new loan would match the rate of their existing loan, and that their taxes and insurance would be covered by the monthly payments. The promises turned out to be false. A few months later the Vasquez-Lopezes received a notice from the county government that their taxes had not been paid. They discovered that they were being charged almost 13 percent interest. "We didn't know what we were signing. They told us one thing and that is not what we signed," said Vazquez-Lopez. "They lied to us." And that's what some are starting to say about JP Morgan Chase... 

February 23, 2004

   Beyond J.P Morgan Chase's involvement with problematic subprime lenders, beyond Bank One's business with payday lenders, there's Bank One's top-three market share of the abusive tax Refund Anticipation Loan industry.  Its main competitor is Household Finance, which hides-in-plain sight behind California-based Imperial Capital Bank a/k/a ITLA Capital Corporation. As reported in the American Banker newspaper of June 9, 2003, "Household has an agreement with the $1.5 billion-asset ITLA Capital Corp. in La Jolla, Calif., that lets ITLA originate the loans, and then immediately sell them to Household." Last week saw a blizzard of flier trying to lure people to RALs at H&R Block. The flier screams, in white lettering on the now ubiquitous green square, "More Money. On the spot." A footnote discloses an "additional fee, disclosed as an interest rate, charged by Imperial Capital Bank." Which is ITLA, and its partner, HSBC's Household....

   The lack of regulatory oversight of HSBC's, and Citigroup's, surge in subprime lending is amazing. In response to comments and evidence Inner City Press submitted in opposition to Citigroup's acquisition of Washington Mutual Finance Group, the Georgia Department of Banking and Finance wrote back, disclosing that while CitiFinancial Mortgage Company's number of loans in Georgia decreased from 2002 through 2002, the number of complaints against it continued to rise, that Washington Mutual Finance Corp. was submitted to complaints on over thirty percent of the loans it made in Georgia in 2001 -- but that "Washington Mutual Finance is not a licensee of this department, CitiFinancial does not need to obtain approval from this department for such a transaction... CitiFinancial notified the Department about its acquisition of Washington Mutual Finance... [ICP's] request for an investigation of the activities of CitiFinancial in Georgia has been referred to the Mortgage Division and is currently being considered." We'll see...

  From ICP's CitiWatch mailbag:

Subj: Citifinancial

Date: 2/20/04 2:05:39 AM Eastern Standard Time

From: [ ]

To: CitiWatch [at]

I want to share my Citifinancial experience with you. I don't expect any help, I'm way beyond help. It will be nice to just get this off my chest. I'll start by telling you that I have the distinct pleasure of having Fairbanks Capital "servicing" my first mortgage and Citifinancial holds my second mortgage. When I first took out the second mortage, it was with a company called Security Pacific. Although the interest rate was high, I was at least treated fairly. My troubles began when Citifinancial took over my note. My original contract allowed for a $3.00 late fee for late payments and that was all that was ever imposed. This all changed when Citifinancial took over. There, seemingly, was not enough money in the world to keep these people happy, and daily interest? That was not part of the contract that I signed and agreed to! I was repeatedly harrassed at work (sometimes called 3 times a day) despite the fact that they were repeatedly informed that personal calls were against company policy. They once left a message with a co-worker for me that stated, "you'll be sorry if you do not get a payment in today". They came to my workplace to collect on the spot payments on more than one occasion. They came to my home repeatedly demanding payment. A neighbor reported that their collection person was seen walking around my house, peering into my windows one day when I was not home. They opened my mailbox and left personal messages - no stamp!! The harrassment was unbelievable.

In closing, I believe that Fairbanks Capital and Citifinancial worked hand in hand to bankrupt me. I cannot possibly meet their demands.

  Finally, for this week, congratulations to Mike Hudson and Southern Exposure, last week given Long Island University's George Polk award for magazine reporting for their 2003 CitiFinancial exposé...  

February 16, 2004

  This week, a medley: subprimers who evade and work around their commitments to drop single premium insurance; the hammer they drop on employees to hard-sell; regulators who look for excuses to disclaim jurisdiction, and others who withhold documents showing compliance (or not) with commitments they've bragged about. In order, we mean AIG, Citigroup, the Treasury Department's OTS and OCC, and the Federal Reserve.

   AIG -- the American International Group that's suddenly filled the TV airwaves with the claim ,"We Know Money" -- begrudgingly committed to drop single premium insurance in connection with the subprime lending business it was acquiring, in the face of Inner City Press / Fair Finance Watch's protests, from American General in 2001. The commitment, made in letters to regulators, was reported in the New York Times (July 21, 2001), and in the American Banker of July 23, 2001: "AmGen to End Single-Premium Insurance.. to counter criticism from Inner City Press."

  Now, Inner City Press has obtained a letter, from AIG's "Merit Life Insurance Company" of Evansville, Indiana (also the headquarters of American General Finance) stating, "Enclosed is your new single premium accidental death and dismemberment insurance policy." The letter is cc-ed to Judith A. Henley, 8079 Kingston Pike, Knoxville, Tennessee. Ms. Henley works at a branch of AIG's American General Finance; ICP has also obtained Ms. Henley's (and other American General Finance employees') "Merit Life Commission Statement." [Ms. Henley is Employee Number 2086663; her AGF branch colleagues are Chris S. Outland, Steven F. Kopman, and Martha B. Watkins.] These commission statements reflect that, for AIG, American General Finance storefronts are a selling place for single premium insurance -- in a sense, that loans are an excuse for selling high-cost insurance. For shame...

  Inner City Press has also been provided with an internal, rally-the-troops e-mail, from within Washington Mutual Finance Corp. just as it was being acquired by Citigroup. It gives a flavor of what Citigroup looks for, in a subprime acquisition -- the hard sell:

From: Cline, Jerry

To: [Branches]

Managers: We can't afford to lose any time on getting loans this months --- we can't wait till you get back next week to start looking for P[ersonal] L[oans] and R[eal] E[state] loans -- you need to have a meeting today on what you expect your staff to get accomplished while you are gone -- I want you to schedule a Real Estate day for tomorrow -- (our pipelines is poor to say the best [sic]) with focus only on RE from 10:00 to 7:00 (8:30 to 10:00 ID collections). Challenge them to reach a certain number of working RE apps by the time you return from a half day or full day off. Make this total for the group -- assign out your collections routes and talk to them about renewals and RE loans from that -- go over my leads and print potential RE customers if need be -- I do expect you to follow up on what they do each day -- don't forget to assign someone in your office a security level of 40 and make sure check signing is covered. This person needs to be in charge and responsible for getting things done -- I'll say this again, it is imperative that we get going on building our RE pipeline immediately.

Business development goals -- goals 18 P[ersonal] L[oans] per FTE / 2 R[eal] E[state Loans] per FTE -- look at your budget that just came out -- this is very do-able -- you have a great staff but don't let them get on cruise -- keep the hammer down! Here are some employees who can take a look at some larger deals -- Brenda Huskey... Donna Reeves -- I want you to be in touch with your teams 2 or 3 times a day to keep them motivated and focused on getting results. -Jerry Cline, Supervisor, District 04

"This material is property of Washington Mutual Finance Corporation or its subsidiaries, is confidential, and is presented for internal use only."

   What Citigroup wants -- and demands and brings about -- is the pushing of loans. It's not a matter of whether the customer wants or needs to have their loans refinanced -- quotas are set, numbers are built up, often by tricking and deceiving customers.

  Meanwhile, the Office of Thrift Supervision's position is that any investment in less than ten percent of a company's stock -- even if it's a controversial subprime lender -- is not worthy on inquiry by the OTS. This has come up in the AXA - Mony proceeding: ICP has shown that AXA has bought 9% of subprime lenders such as Centex (with its predatory five-year prepayment penalties) and Advanta; last week, OTS staff told ICP that as long as an investment is below 10%, the OTS doesn't want to hear anything more about it. Supposedly that's now being reconsidered: we'll see. In a follow-up to last week's story on the Office of the Comptroller of the Currency, complaints that have been submitted to the OCC (rather than state officials) have been returned -- the OCC will only accept them if signed by the consumer (while state attorneys general - and even HUD -- will accept and look into complaints by organizations, based on patterns and not only individual facts).

  Also last week, ICP filed five Freedom of Information Act appeals with the Federal Reserve, challenging the Fed's increasing opaqueness and lawlessness, click here to view. Finally, for this report, the Global Inner Cities view: While anti-predatory lending laws are being preempted and / or abandoned in the continental United States, in Guam an interesting proposal is moving forward: Bill 173, introduced by Sen. Rory Respicio, D-Chalan Pago, would amend and update the property attachment and execution exemption law. It states that a debtor's homestead are exempt from seizure for the claims of creditors. It also lists personal property exemptions, including furniture, tools and books used for work, clothes, two firearms, and motor vehicles for each member of a family. The bill is being opposed by industry, including U.S.-based subprime lender Wells Fargo Financial. It is now pending in the Committee on Judiciary and Transportation... If Wells Fargo (and Citigroup and HSBC) can export predatory lending, consumer protection, too, must be exported...

February 9, 2004

   Predatory lenders of all sorts are enabled by the preemption decrees of the Offices of the Comptroller of the Currency and of Thrift Supervision -- case in point is Tennessee. Until last week, the state's governor, Phil Bredesen, was pushing for anti-predatory lending legislation, the Tennessee Home Loan Protection Act. Then, following the OCC's preemption announcement, Bredesen gave up, and has decided instead to focus on mortgage brokers. Therefore, even non-bank lenders will escape scrutiny. The result? Last week, the Tennessee Department of Financial Institutions talked tough to a mortgage broking company, specifically about a marketing flier which announced, not without basis, that Household Finance, Beneficial and CitiFinancial are all subject to predatory lending settlements. DFI Commissioner Kevin Lavender, previously an employee of SunTrust Bank, doesn't like brokers bad-mouthing subprime lending companies. Meanwhile Commissioner Lavender has refused to release any information about consumer complaints against lenders: even a summary or mere enumeration of complaints. So who's being protected? The answer: CitiFinancial. Thanks to Comptroller Jerry Hawke...

  A Tennessee footnote: the predatory players include Bank One's customer First America Cash Advance, and such lenders as Tri-Cities Finance (the "Tri" refers to Bristol, Kingsport and Johnson City)....

  On Household / HSBC: in continuing opposition to HSBC's application to the New York Banking Board to acquire Bank of Bermuda, ICP has submitted a fourth comment, and Freedom of Information appeal. Back on December 14, 2003, ICP requested among other things "records relating to the NYBD's October and December 2002 predatory lending settlement with Household...[and] all records reflecting any NYBD personnel’s communications with HSBC or its affiliates regarding compliance with the above-referenced settlements and commitments, or regarding the referenced Bank of Bermuda." In its incremental responses, which terminated February 4, 2004, the NYBD has denied ICP access to the entirety of a PriceWaterhouseCoopers LLP report "which relates to certain compliance monitoring services provided by PWC in connection with certain lending practices of Household International." ICP contests this withholding in full... While the NYBD provided ICP with five pages listing complaints against Household, one line per complaint, ICP contends that at least redacted copies of complaint documents should be provided, and notes that numerous other state banking department provide full complaint files (sample copies available on request). Since the NYBD publicly claimed that it limited its settlement with Household to branch-originated loans because that, and not brokered loans, was the most complained-about delivery channel, there is a public interest in the release of the withheld complaint information.

   We note that it appears that HSBC's Household / Beneficial Finance continues to engage in predatory lending practices, including duping Spanish-speaking consumers with loan documents they cannot read, and then gambling whether the duped consumers could obtain and afford counsel to seek redress. [Citations omitted]. ICP is contesting all of the withholdings, noting for example the redaction in full of page 8 of the "Consumer Protection Plan" upon which the NYBB will presumably rely when it rules on HSBC's Bank of Bermuda application.

   On HSBC's ongoing tax refund anticipation loans: ITLA Capital's Feb. 4 earnings press release bragged about its "strategic business alliance with Household International," specifying that because its tax RAL "program relates to the filing of income tax returns, transaction activity is concentrated during the tax season. This resulted in the Company earning substantially all of its RAL program income in the first quarter of the year. Household informed the Company in November 2003, pursuant to its tax refund loan agreement between Imperial and Household, that Imperial was affirmed as Household's strategic banking partner for the 2004 tax season." Best practices? We think not...

  Finally, for this week, from the mailbag:

Subj: My Wells Fargo account

Date: 2/6/04 5:29:35 PM Eastern Standard Time

From: [Name withheld]

To: WellsWatch [at]

...I began receiving an almost daily series of phone calls [from Wells Fargo]. Because the message started once my phone picked up the call, all I was able to hear was a phone number and not much else. About a week later, I finally called the number, found out it was Wells Fargo calling, and kept on the line. It was virtually impossible to reach a human, but I was able to do so eventually. The person on the phone asked me to verify my information, then proceeded to ask me a series of what I considered to be harassing questions (i.e., "Are you living in the mortgaged property and do you plan to keep it?"). Eventually I was able to pin the person down, and all this was about a (by then) 26 day late payment. I asked for the exact address to which I should send the payment, and the next day over-nighted it from my place of employment.

Imagine my shock on Feb. 5, over a week later, to find another phone call on my machine from guess who? I called and they had never posted the payment to my account! On my electronic banking, I was able to see that indeed the check had been cashed the very next day, and that it was received at the address I sent it to. I was virtually forced to do an electronic payment because they threatened foreclosure on my mortgage. They did say they would open a trace on the first check I sent, and I was to call the next day (today). I called this morning and they would not give me any information, saying that it was still an "open investigation"... To whom do I write to register my complaint?

  Our interim answer: write to the Office of the Comptroller of the Currency, which claims to be on top of Wells Fargo's mortgage company, and all other national banks and their operating subsidiaries... Fax (according to the OCC's web site) to 713-336-4301 -- and let us know what happens next...  

February 2, 2004

    This week, a medley of Freedom of Information Act responses. Among the documents belatedly provided to Inner City Press by the New York Banking Department are HSBC's reports on its commitments to the NYBD to bring its market share of applications from "majority minority" (MM) census tracts into line with its overall market share. Well, HSBC still dramatically trails the industry. In Buffalo, its overall market share of home purchase / refinance applications was 10.61%; in majority minority census tracts, only 2.89%. This is among the reasons that HSBC trying to withhold, and the NYBD redacting, HSBC's "Report Card" for Household is so troubling...

    A new regime at CitiFinancial? Documents provided to Inner City Press last week include a letter from CitiFinancial's general counsel (and ex-Maryland regulator) Marry Louise Preis, purporting to respond to issues ICP has raised. Interestingly, neither Ms. Preis nor anyone else at Citi saw fit to send a copy of this purported response to Inner City Press, or any other commenter. Ah, transparency...

    In the run-up to JP Morgan Chase submitting its Bank One applications, Columbus Business First of Jan. 30 reports that "since Bank One moved its headquarters from Columbus to Chicago in 1998, community development lending in Columbus has suffered... Bank One closed its Community Development Corp... As for the closing of Bank One Community Development Corp. [Jeff Lyttle, a Bank One spokesman] said, it coincidentally occurred as the bank moved its headquarters." Some coincidence... The article reports on Inner City Press / Fair Finance Watch's and Ohio groups' opposition to the proposed merger. We also note the Federal Reserve Bank of New York's January 15, 2004, letter to ICP, stating that information forwarded to the Fed by the Michigan Attorney General's office "was determined not to be a consumer complaint... As you know, the OTS approved this application on November 28, 2003. Based upon these facts, our Consumer Complaint Unit will not process your letter as a consumer complaint." Well it'll be a protest, then...

   Finally, for this week, on February 1 Inner City Press' Human Rights Enforcement project put forward a text called "Faust in Rwanda." Click here to view the first ten chapters (which are intentionally set before April 6, 1994: the run-up, the lead-in, the often forgotten background). With views, complaints or other feedback, contact us.

January 26, 2004

   While our main focus, in JPM Chase-Bank One, is one Chase (and its predatory lending conduit, Chase Funding), it must be said that Bank One also enables predatory lenders. Take, for example, the 10-state payday lender First American Cash Advance. Bank One shows up as a UCC-secured lender to FACA's subsidiaries in Tennessee, South Carolina, Georgia, Arkansas, Florida and Texas. First American is a controversial company, to say the least -- even the U S. Army has declared it an "enem[y] at its gates," see Washington Post of December 28, 2003, " Army Launches Offensive Against Lenders; Military Says Payday Loans Promote Fiscal Irresponsibility, Hurt Troop Morale." A more detailed account of First American's practices was made public by a FACA employee, as recounted in the Charleston (W. VA) Daily Mail of April 29, 2002:

Ginger Moore began working for First American Cash Advance last June as manager of the company's St. Albans branch. She left earlier this month with a bruised conscience and an unpleasant aftertaste from her time with the company. Moore said she quit. First American, which makes payday loans, opened its first offices in West Virginia last summer. Now, there are offices at The Shops at Trace Fork, St. Albans, Huntington, Parkersburg, Beckley, Clarksburg, Fairmont and Elkins. Even though Moore holds a master's in business administration from West Virginia Wesleyan College, her training at First American "was like, 'Oh my gosh, what a wake-up call,'" she said.

The wake-up: First American charges interest that would equate to an annual rate of 938 percent on a seven-day, $ 300 loan... Earlier this year, Moore reached a conclusion. "I felt the interest amount was extremely high - a form of legalized loan sharking," she said.... Moore insists she is not a disgruntled employee. "I'm just glad to be out of that kind of environment," she said.... Moore said she contacted the Daily Mail because "consumers need to know about the interest they're being charged. "I am thankful that I am no longer an enabler in such a vicious cycle of greed targeted at those on fixed incomes and the low-income working class," she said.

     Bank One is a secured lender to First American Cash Advance -- not once, or three times, but at least six times. Inner City Press is submitting UCC print-outs to the states at issue, specifically in opposition to the JPM Chase - Bank One proposed mega-merger. Developing...

    Still flowing in, responses from state regulators regarding Citi-WaMuFi. From Baton Rouge comes a letter, from Louisiana Commissioner of Financial Institutions John D. Travis, stating that Citi filed no WaMuFi-related application, but that ICP's other requests "will be taken under consideration by me." The state's chief examiner is cc-ed, so we'll see.

      The Office of Thrift Supervision, following Inner City Press' Freedom of Information Act appeal, released some information about its inclusion in advance of the proposed Chase FSB in the OTS' budget -- even while Chase's contested application was pending. The OTS' letter states that it has "determined to grant your appeal, in part... Unlike many federal agencies and offices, OTS does not rely on Congressional funding of its budget. Instead, assessments on, and fees paid by, the thrift industry fund OTS operations... the budget is not a public document and is not publicly disclosed or shared with other government bureaus or offices... In this instance, however, some protected information was publicly disclosed by the agency. As you noted in your request, a newspaper article indicated that an OTS spokesman had stated that the agency had take into account projected assessment revenue from one institution that was contemplating switching to an OTS charter... Once information is publicly disclosed, it is no longer entitled to Exemption 5 protection. In this case, I have accordingly determined to release a responsive portion of one of the withheld pages related to the inclusion of projected assessments from Chase FSB and Hudson City Bancorp in the projected fiscal year 2004 assessments."

    So -- even while purporting to solicit and consider public comments on Chase's application to charter a savings bank and put its nationwide consumer lending into it, the OTS was already "banking" the assessment fees it would collect form Chase. This is no way to regulate financial institutions, particularly ones insured by the government and, behind it, the people... It confirms deep CRA-enforcement problems at the OTS, as well.

    Meanwhile the FRB, by letter dated January 13, further extends its time to respond to Inner City Press' FOIA request about JP Morgan Chase, "in order to consult with another agency or with two or more components of the Board having a substantial interest in the determination of the request." We'll see.. 

    On Household, under cover letter dated January 21, the New York Banking Department finally purported to respond to ICP's December 14 Freedom of Information request about HSBC's compliance (or not) with its commitments to clean up Household International. While the NYBD claims to be providing a copy of "the HSBC Consumer Protection Plan," large parts of this "Consumer Protection Plan" are blacked out with magic marker, including "HSBC's 'Report Card.'" Talk about accountability.... And why would HSBC be so secretive? The NYBD states that it "is still reviewing certain documentation relating to compliance monitoring. When the Department's review of said documentation is complete, you will be notified." We'll be waiting...

January 20, 2004

   To mark Martin Luther King Day, Inner City Press / Fair Finance Watch prepared the filed its initial comments on the proposed mega-merger of JP Morgan Chase and Bank One. Chase's attempts to escape state anti-predatory lending laws by shifting its nationwide consumer and subprime lending into a federal savings bank is one theme -- another is that, as demonstrated by HMDA data and otherwise, Chase has grown more disparate and less responsive after each of its previous acquisitions. We'll review four cities, below in this Report: but the analysis can and will be carried out for cities all over the country. Only 13% of Chase's mortgage lending is in its bank branch / CRA "footprint," so the analysis, and the challenge, is nationwide.

  Beyond Chase, ICP's Comments note that Bank One, too, is involved with questionable subprime lenders. Bank One, N.A. serves as trustee for pools of loans by, for example, New Century; Bank One purchases subprime loans for small subprimers like Paragon Finance in Indiana.

  Here's some comparison, 2002 to 1999, of Chase's lending disparities: in 2002 in the Washington DC MSA for conventional home purchase loans, Chase denied loan applications from African Americans 4.94 times more frequently than applications from whites, and denied Latinos 2.51 times more frequently than whites. This is worse than Chase's performance in the Washington MSA in 1999, when CMMC denied the applications of African Americans 2.96 times more frequently than whites.

  In the Boston MSA in 2002 for conventional home purchase loans, CMMC denied loan applications from African Americans 8.89 times more frequently than applications from whites, and denied Latinos 6.38 times more frequently than whites. This has grown worse from Chase's performance in Boston in 1999, when CMMC denied the applications of African Americans 2.34 times more frequently than whites. In 2002 in the San Francisco MSA, CMMC denied the conventional home purchase loan applications from African Americans 4.48 times more frequently than applications from whites. Again, this has grown more disparate from Chase's performance in San Francisco in 1999, when CMMC denied the applications of African Americans 2.41 times more frequently than whites. Finally (for now), in 2002 in the St. Louis MSA, CMMC denied the conventional home purchase loan applications from African Americans 3.62 times more frequently than applications from whites. Once again, this has grown more disparate from Chase's performance in 1999, when CMMC denied the applications of African Americans 2.95 times more frequently than whites. Chase gets worse with each acquisition.

   It is important, ICP believes, that action begin at the earliest time on this mega-merger proposal: already posturing has begun, including propping up Trojan horse "opponents" who will, invariably, end up praising the companies and their merger. We've seen it before; live and learn.

   In other subprime news, last week the New York Banking Department finally purported to respond to ICP's Freedom of Information Act request for complaints against Household (and all reports on HSBC's compliance with its reform "commitments" -- no such documents have yet been provided). What was provided as a list, one complaint per line, of complaints against Household Finance Corp., Household Automotive Finance Corp., Beneficial New York, Inc., and Household Retail Services, Inc.. Strangely, the NYBD has decided to withhold all information about complaints in 2003, and, apparently, all records of reflecting any NYBD overseeing of HSBC's supposed reform commitments. Maybe there is no overseeing -- it sure seems that the "reforms" are paltry...

  Finally for this week (advisory: somewhat graphic content follows, not by ICP's choice), we continue to inquire into what it is, exactly, that Citigroup is acquiring along with Washington Mutual Finance Group. WaMuFi's operations in Mississippi, where it is subject to a $70 million predatory lending jury verdict, were cynically (and quietly, until exposed) excluded from the deal. Now, Inner City Press has been made aware of a sexual harassment lawsuit filed earlier this year against WaMuFi, branch manager Clarence Porter and other management at Aristar and its successors (i.e., Citigroup). We'll first quote from the Complaint, then add details from a recent ICP interview with the plaintiff, Glynda Shealy:

"Plaintiff was first hired by [WaMuFi] on or about August 26, 1988... During Plaintiff's employment, here supervisor, Clarence Porter, made repeated unwanted advances of a sexual nature to the Plaintiff, including, but not limited to, inappropriate graphic sexual comments and actions. These actions were uninvited, unwelcomed and resented by the Plaintiff."

  ICP note: these actions, the plaintiff has told ICP, included Clarence Porter putting a lion sock-puppet "on his, uh, private area" and ordering the plaintiff to "pet my Leo until he roars." When complaints were made up the chain of command, nothing was done. Ms. Shealy (who thankfully is not subject to any gag order, since Citigroup due to the above-recited never "acquired" her) also states that WaMuFi engages in predatory lending, including selling overpriced credit insurance that is not requested, and charging 24% interest even if the borrower has a pristine credit history. This, is what Citigroup is acquiring....

January 12, 2004

   Bank of America's supposed $750 billion lending pledge is a sideshow -- the event of last week we'll focus on here is Comptroller Jerry Hawke's order preempting all states' anti-predatory lending laws, for all national bank and their subsidiaries. As Hawke admits in a Q&A about the rule, the OCC doesn't even have a list of national bank subsidiaries that it's turning loose from state laws. In fact, even when national banks apply to the OCC to set up these subsidiaries, the public notices given in the OCC's Weekly Bulletin are incomprehensible: there's no way to know what is being applied for. An example:


   What is it? There's no way to know. And since the applicable comment periods run out before the OCC responds to FOIA request for copies of applications, the public must either comment blind, or just let it slip on by, and place faith in the OCC to regulate Citigroup (whose lobbying spending for the first six months of 2003, $4.6 million, was sharply up from full-year 2002).

   The financial press flubbed much of its reporting, wanting to make it a mano-a-mano between Hawke and various state attorneys general. The Wall Street Journal couldn't even get its facts straight: its Jan. 8 article reported that "of most concern to consumer groups, the OCC said its new rules govern not only the local offices of bank-holding companies but also the operating subsidiaries owned by those banks.." Note the word "bank-holding companies" -- its wrong, the preemption order applies to national banks, that's actually what the whole story is supposed to be about.

   The Hartford Courant caught Wells Fargo gloating: its spokeswoman Janis Smith mouthed the pabulum that "A patchwork of inconsistent rules passed by states and municipalities is not in the best interest of either consumers or businesses." Yep, let's count on Wells Fargo Financial, CitiFinancial, Chase and Household to tell us about consumers' best interests...
Or maybe National City Corp. -- a Jan. 11 column in the St. Louis Post-Dispatch quotes Inner City Press that "National City avoids minority neighborhoods with its regular lending programs, while targeting them for higher-cost loans from First Franklin. In Cleveland, for instance, African-Americans received 43 percent of First Franklin's loans in 2002 but only 2.9 percent of National City's conventional mortgages." ICP raised this to the Federal Reserve on NatCity's application to acquire St. Louis-based Allegiant Bank. NatCity's chairman, David Daberko, has written his own response to ICP's comments -- but it's a response that doesn't say anything. It's a two page letter, that provides no explanation of the lending patterns at First Franklin, or of anti-predatory lending safeguards, referral-up, nothing -- all things that the Fed has asked other subprime lenders about. So the Fed will, if it follows its own precedents, ask NatCity some questions. Will Mr. Daberko be the one responding? We'll see...

  ICP's new action this week involves the insurance merger announced in late September 2003, between Manulife and John Hancock. ICP has commented to the Federal Reserve Board, and insurance regulators in several states, click here to view...

January 5, 2004

   The world of predatory lenders is like a Mobius strip, or a staircase by M.C. Escher: companies which claim to be getting out of the business quickly get back in; company names change but those behind them remain the same. Case in point, this week, is Bank of America's purchase, on December 15, of an equity position in the subprime lender Oakmont Mortgage Co. -- whose management comes from the subprime lender First Franklin, which BofA previously sold to National City Corporation (which ICP Fair Finance Watch challenged over the holiday -- see below).

     The new equity stake was disclosed off-handedly by BofA in a December 22 letter acknowledging that it "acquired an interest in a nonconforming mortgage lender on December 15, 2003, when CIVC Partners ('CIVC'), a private equity fund affiliated with Bank of America, acquired an equity interest in Oakmont Mortgage Company ('Oakmont'). Oakmont originates mortgage loans that may not qualify for FNMA or FHLMC programs." Oakmont in pure subprime -- and even a cursory review of its most recent Home Mortgage Disclosure Act data show that it is violating the Equal Credit Opportunity Act and HMDA.

   Even a cursory review of Oakmont Mortgage Co.'s HMDA data shows problems at the company, in which BofA has just blithely acquired an equity stake. For example, in the Detroit MSA, Oakmont in 2002 reported 130 applications for conventional home purchase loans from African Americans, all approved and originated, and 48 applications from whites, all approved and originated. Oakmont targets a protected class with higher-cost credit (whereas BofA redlines, with normal cost credit, having made in this MSA in 2002 fully 38 such loans to whites for every one loan to an African American, while subprime Oakmont made 2.7 times more loans to African Americans than to whites). But any reasonable pre-acquisition due diligence would have shown that Oakmont presumptively violates HMDA and the Equal Credit Opportunity Act, by claiming to have issued no denials at all in connection with 179 applications. HMDA relies on reporting of denials; ECOA requires notices of adverse action.

    In the Chicago MSA, Oakmont in 2002 reported 33 applications for conventional home purchase loans from African Americans, all approved and originated, six applications from Latinos, all approved and originated, and seven applications from whites, all approved and originated. Again, comparison to BofA's demographics of lending -- 1346 loans to whites, only 77 to African Americans and 76 to Latinos -- shows that Oakmont targets protected classes with higher-cost credit, and BofA excludes them with normal-cost credit. Also, Oakmont violates HMDA and ECOA, by claiming to have issued no denials at all in connection with 46 applications.

    The pattern is slightly more complicated, but no less violative, in the Atlanta MSA, which BofA has CRA duties. In the Atlanta MSA in 2002, Oakmont reported 138 applications for conventional home purchase loans from African Americans, leading to 129 originations, nine "withdrawals" and no denials. Oakmont reported four applications from Latinos, all leading to originations. Oakmont reported 109 applications from whites, leading to 101 originations, eight "withdrawals" and no denials. Again, comparison to BofA's demographics of lending -- 1831 loans to whites, 784 to African Americans and 94 to Latinos -- shows that Oakmont targets protected classes with higher-cost credit. Also, Oakmont violates HMDA and ECOA, by claiming to have issued no denials at all in connection with 234 applications. Apparently, fifteen applications that would have been denied were converted, by whatever means, into withdrawals. But ECOA requires notices of adverse action, and HMDA relies on reporting of denials.

   To put it mildly, this reflects poorly on BofA's purported due diligence in connection with subprime lending. If BofA doesn't even review the HMDA data of a subprime lender it is buying an equity stake in, it is difficult to imagine that BofA does sufficient -- or any -- due diligence on the subprime lenders whose loans it securitizes and helps sell.

    This mid-application purchase of an equity stake in Oakmont also reflects just how misleading BofA's purported exit from subprime lending was. Not only does BofA and its ABFC continue to enable questionable subprime lenders all over the country -- here, Wild Bill Dallas, John DuHadway and Bruce Dickinson, the senior management of one of the subprime lenders BofA sold (First Franklin) have enlisted BofA funds to purchase another subprime lender, which assistance BofA has provided despite the irregularities in the lender's record that even a cursory review of HMDA data would have uncovered (and now has).

   Speaking of First Franklin and predatory lending, for coverage of ICP's Jan. 2 challenge to National City Corp.'s application to acquire Allegiant Bancorp, see this week's Bank Beat Report.

   A final sick-sad (or funny) subprime note: Lenders Direct Capital Corp., third-tier purveyor of subprime (high-cost) loans, has announced it has hired ex-Yankee Reggie Jackson to be its spokesman, saying that Reggie's "rock solid credibility, intelligence and experience are assets to us as his new teammates." Welcome to 2004 -- batter up!

December 29, 2003

   Inner City Press last week received from the North Carolina Commissioner of Banks a letter claiming that his Office "does not have jurisdiction over" the proposed sale of 37 WaMu Finance offices in North Carolina to CitiFinancial. We disagree, and have replied to that effect. (South Carolina, for example, states that licenses can be transferred if the acquirer, even if already licensed, can past character and fitness tests and show advantage and convenience to the community -- all dubious, for a predatory lender). The NC letter also claims that most consumer complaint information is confidential under NC law -- which contradicts detailed information ICP was provided with by the NC AG's Office. But Banking Commissioner Smith provides a break-down of complaints in NC -- there are more complaints over the past three years against CitiFinancial than WaMu Finance, particularly with regard to consumer (non-mortgage) loans. We have asked for the underlying complaint files; developing....

   Meanwhile, HSBC Household's predatory lending is at issue in constitutional challenge to Delaware's Freedom of Information Act: as reported in the Wilmington News-Journal of Dec. 23, ICP "requested documents relating to a multistate settlement with lender Household International after an investigation into consumer lending abuses." ICP " sued Brady and Minner in November, claiming Delaware's open-records law is unconstitutional because it gives only Delawareans access to the state's public records." ICP "claims the residency requirement violates the privileges and immunity clause of the Constitution, which says no resident of one state shall be denied equal opportunity under another state's laws. Delaware is one of only seven states whose public-record laws explicitly include a residency requirement." ICP "twice was denied access to records after making requests under the law this year." ICP " said Monday he would continue pressing the constitutionality issue. "We're very much committed to seeing the case through and getting the law changed.'" Yep...

  Finally, a one-paragraph year-in-review: CRA 2004 (and the anti-predatory lending fight, which BofA keeps dodging and refusing to address) will heat up with public hearings on Bank of America's Fleet acquisition proposal, Jan. 14 in Boston and Jan. 16 in San Francisco. But what of 2003? The Fed held no merger hearings -- it declined to get involved in the predatory acquisition bleeding over from 2002, HSBC-Household; it never announced any results of its supposed examination of CitiFinancial (whose proposed acquisition of WaMu Finance it is also staying away from). Where are these regulators? Well, the Comptroller of the Currency is hell-bent on preemption state anti-predatory lending laws, as is the Office of Thrift Supervision (which is also desperate for money). The FDIC keeps its head down, mostly due to how few large banks it regulates - but it's fine, it says, with payday lending.... Here's to more aggressive consumer and community protection in 2004, happy holidays.

December 22, 2003

  In this cold season, Inner City Press has just received hot documents on CitiFinancial and Chase Manhattan Mortgage, and has redirected them to regulators, demanding action and investigation. On Citigroup, the documents are included in ICP's second set of comments opposing Citi - Washington Mutual Finance Group, documenting last week's Mississippi exclusion issue, Robert Rubin's claim that he (and Citigroup) are not aware of predatory lending issues at WaMu Finance, and several hundred pages of complaints against CitiFinancial which ICP has just received. Here's a representative complaint:

"Nobody told me or my wife about the loan being a daily interest loan at the closing or we wouldn't have signed. After I made two or three payments I found out something was wrong and I went to Jennifer [Dickerson] and she told me it was a daily interest loan... This type of loan should be against the law... I'm not trying to get out of paying what I owe in 60 payments and of course some interest like an APR of 7% but the daily interest loan is ridiculous, you can't even payoff a loan like this. I told Meredith that I have a hearing problem and also that I have a brain problem.. I'm a disabled veteran of foreign wars and I can't hear very good.. I can't afford to pay two payments a month, I tried, it messed me up. They asked me if I wanted to take out life insurance in case something happened or I died. That I was told that because I took the insurance, the daily interest changed.. I never told them I was 51, I told them I was 64...I'm going to be in serious trouble if this is not resolved."

   To this, CitiFinancial responded:

"We are sorry [ ] did not understand that the loan was an interest bearing loan... The life insurance was cancelled back to the date of loan since we had the wrong birth date and should not have sold him the insurance... we were not aware of his hearing problems of his brain problems as he put it... We are regulated by the state examiners and did nothing different on the loan than any other loan."

  And that's just the problem -- this is a TYPICAL CitiFinancial loan...

   How does CitiFinancial get away with it? Well, also among the responsive documents are e-mails reflecting that West Virginia legislation in its draft form was circulated by the regulator to CitiFinancial's April Park, in Baltimore, and Citigroup Vice President for Government Relations, East Division, Robert Sweeney, in DC, who responded with "proposed revisions and comments." This despite the fact that even the W. Virginia regulator felt compelled to deny licenses to at least four Primerica agents who were put forward by Citigroup for mortgage broker licenses.

   CitiFinacial's outreach to regulators is also reflected in Idaho's (initial) FOIA response (which was provided only after the regulators informed both Citi and WaMu of ICP's request). There's a Nov. 25 telephone message slip of CitiFinancial's ex-Maryland Commissioner Mary Louise Preis calling for Idaho regulator Gavin Gee ("call if you need more info" about Citi-WaMuFi), then an e-mail within the agency, "Gavin has notified me that if we get an questions / complaints / concerns from callers regarding CitiFinancial's recent purchase of Washington Mutual Finance Corporation, we should refer them to 'Mary Louise Preise' (pronounced like 'Price'). Ms. Price is the state-relations person for CitiFinancial..."

  Question: why would those who contact the government agency to complain about Citigroup be referred to CitiFinancial's Ms. Preis? We've now asked...

   And now the time has come to ask, what is wrong with the Federal Reserve Board? The basis for the question, this week, is the Fed having let expire the comment period on the Bank of America - Fleet application, a $47 billion proposal to create a bank at / over the 10% nationwide deposit cap, without granting the many requests for a public meeting, including from each and every member of the Massachusetts Congressional delegation. What -- the Fed staff is too busy? The Fed has gotten worse and worse over the years -- for example, on a much smaller deal, Fleet - Shawmut, the Fed held three public meetings, in Boston, Hartford and Albany. In 1998, the Fed held public meetings on four of that year's mega-merger proposal. And since then? Nothing.

   New (since then) Governor Susan Bies sent ICP a Dec. 19 FOIA appeal response regarding the more then 100 pages of BofA-Fleet documents the Fed is withholding. Gov. Bies "upholds" all of the withholdings, but states that "[t]he withheld material includes an item, consisting of seven pages, that was voluntarily submitted by Bank of America before the application and notice were filed that was commercial and financial in nature. I have confirmed that this information is not customarily disclosed to the public by the submitter.... Bank of America recently withdrew its request for confidential treatment of a portion of this item. Accordingly, you will be provided with four full pages and one page that has been redacted to remove descriptions of information that remains confidential."

  How convenient -- the Fed is never wrong, rather, the submitter withdraws its request for confidential treatment. The scam is that if one doesn't submit a FOIA appeal (which too few requesters do), you're not told that the previously withheld information is now "public." (And so, it's not public). The Fed's manipulation of FOIA, including in its annual reports, continues and grows worse.

   The four-and-a-half page released, right at the comment period deadline, included e-mails concerning a November 10, 2003, conference call with BofA -- e-mails from BofA's Scott Cammarn to the Fed's Scott Alvarez and others, entitled "Fleet Deposit Cap Talking Points." The attachment, only partially released, states that if the FDIC's June 30, 2003 Summary of Deposits -- the data set the Fed used in 1998 on BofA-NationsBank -- is used, a combined BofA-Fleet would hold 10.02% of nationwide deposits. But then, BofA's "Talking Points" tell the Fed, "This Calculation is Wrong." There follows an argument about thrift escrow funds, which is repeated in BofA's application. But why run this argument by the Fed before applying, except to get pre-approval? Developing... 

December 15, 2003 (and see Dec. 15-16 Update, following this Citi Report)

    Inner City Press has just learned that Citigroup, which was reported based on its own Nov. 24 statements to be acquiring all of the subprime lender Washington Mutual Finance Group, has in fact excluded WaMuFi's 18 offices in Mississippi from the proposal. ICP learned this in a response from the Mississippi Department of Banking and Consumer Finance to ICP's Dec. 1 Freedom of Information Act request. Deputy Commissioner Theresa L. Brady, in a Dec. 9 letter to ICP, states:

"Please be advised that it is our understanding that pursuant to correspondence from Citigroup, that WMFC's Mississippi loan offices and receivable are excluded from the transaction. Thus, Citigroup's acquisition of WMFC will not include the eighteen (18) WMPC locations in Mississippi.... Please be advised that all applications, documents and correspondence that you have requested will only be released via subpoena."

   The basis for Citigroup's silent carve-out of WaMuFi's Mississippi branches would appear to be the $71 million predatory lending verdict against WaMuFi in the state of Mississippi. [The verdict was first reported in the Jackson, MS Clarion Ledger of June 14, 2001, "Lender Hit with $71M Verdict Lawsuit Accused Washington Mutual of Flipping Loans," and was subsequently further disseminated, and raised by ICP: see below. It appears that Citigroup has implicitly acknowledged that predatory lending issues exist at WaMuFi, but has tried to argue, again silently, that these issues exist only in Mississippi. But in fact WaMuFi's practices, including training and sales practices, are not materially different in WaMuFi's operations in its other 25 states.

    Citigroup's Nov. 24 press release was headlined, "Citigroup to Acquire Washington Mutual Finance Corporation for $1.25 Billion" -- it did not say, "Part of WMFC." It quoted Marge Magner, CEO of Citi's Global Consumer Group, that "[o]ver the past three years we have raised the bar for professional practices and conduct in the consumer finance industry, gaining the positive recognition of many consumer groups and industry observers alike." It's a $1.25 billion proposal, in a field in which Citigroup has been sued, by the Federal Trade Commission. But in a second round of duplicity, beyond the material omissions from Citigroup's Nov. 24 press release, here is the transcript of a question-and-answer with Robert Rubin, the chairman of Citigroup's executive committee, which ICP conducted on December 11 on WNYC Radio, 820 AM in New York:

ICP: Good morning. Hi, Brian. Mr. Rubin, I was wondering if you could describe, as you don't in your book, what if anything you've done to address the predatory lending with which Citigroup has been charged, by the Federal Trade Commission and by the community group Inner City Press in its recent report, Predatory Bender. That's the process of lending at very high interest rates, unmerited by people's credit scores, through CitiFinancial.

Robert Rubin: Well, I think in fairness to Citi, and it's not a project that has come under my aegis, but in fairness to Citi, I think they've had a very successful, well, a very active and proactive program to deal with issues around subprime lending, and they've gotten a lot of credit for it from a lot of parties, so I, as I say it's not something I've been involved in personally but I think that they have done a job very responsive to the concerns that people have had and they've gotten a lot of credit for it amongst many groups.

ICP: I think they've been sued by the FTC, and I think concerns still exist and yet they continue to buy other subprime lenders, such as Washington Mutual Finance Group.

So I guess I just think that, since you were at Treasury and you're such a public policy man, I would have, it would seem, it would seem that it would behoove you to, an issue that impacts low income and minority communities, to get involved in making sure it's cleaned up.

Rubin: Well, uh, let me say this, I think it is exceedingly important to low income -- while I was at Treasury I was very focused on uh the availability of credit for low-income groups, because it's been a real problem in this country and, as you may remember, the Community Reinvestment Act was under great threat, we threatened to veto any efforts to eviscerate the CRA. I think subprime credit plays a very important role in the life of low income people and I think, I don't think there's any question as a matter of fact, that when Citi acquired Associates that was a very good step forward in terms of improving the provision of subprime credit in terms of the kind of concerns that you have and if there are issues with Washington Mutual, I don't know if there are or not, I just don't know, but if there are, that's something that Citi will deal with. Let me just say, very quickly, that I don't know of any such issues.

Host Brian Lehrer: I know you're relatively new as chairman of the executive board of Citigroup, but as someone who comes under a politically progressive mantle, when I search the Web, under Citigroup, as I did this morning in anticipation of talking to you, the two main things that come up are Citigroup's own related sites and issues having to do, you know, activist sites having to do with the predatory lending allegations. So, it's something you may want to get your mind around.

Rubin: Yeah but let me just repeat what I said. Look, there are people who are going to allege all kinds of things, I don't think that's the issue, I think the issue is what are the reality, and in terms of the realities, I think an awful lot of people who have what I would call a balanced view of this, who feel that Citi has done a very good job of dealing with a set of very complex issues some of which, actually a fair number of which I suppose, they inherited when they acquired Associates.

   In this transcript, the original audio version of which is available here (this segment runs from 19:25 to 22:00) , Citi's Robert Rubin claims to not be aware of any predatory lending issues at Washington Mutual Finance Group. Forget for a moment Citigroup's Mississippi carve-out, and Marge Magner's quote and involvement: that predatory lending issues exist at WaMuFi was publicly reported in connection with Citi's Nov. 24, 2003, announced (see, for example, the Seattle Times of Nov. 25, 2003, at C1, "Washington Mutual Selling Controversial Loan Subsidiary," which reported that "[t]he predatory-lending allegations dogged WaMu as it expanded into new markets. In New York City, for example, activists called for the bank to revamp its business practices before taking over Dime Savings."  That is correct: ICP began publicly raising WaMuFi predatory lending issues well before Citigroup's Nov. 24 acquisition proposal, see, e.g., the American Banker newspaper of October 21, 2001, "Group Protests Deal," noting "a $73 million jury verdict in July against another unit, Washington Mutual Finance Group. The Seattle Post-Intelligencer of October 16, 2003, reported that ICP "accused Washington Mutual of predatory lending to minorities through its subprime lending subsidiaries;" there have also bee reports in the National Law Journal (of July 9, 2001) and in various other legal publications, e.g., <>, reporting that "[s]imilar claims by several hundred other Washington Mutual customers are pending."

   Ostensibly, Robert Rubin, who is paid tens of millions of dollars a year by Citigroup, doesn't read the newspapers, or have them summarized for him at least on issues surrounding companies that Citigroup is proposing to buy for over $1 billion. Either he is inattentive, or he is lying, it seems. Substantively, while Citigroup is implicitly arguing these issues exist only in Mississippi. WaMuFi's practices, including training and sales practices, are not materially different in WaMuFi's operations in its other 25 states. ICP is pursuing this; watch this space.

Interim Update of Dec. 15-16, 2003: The Seattle / Puget Sound Business Journal, citing Inner City Press' prior report, got Washington Mutual to confirm that CitiFinancial is not even trying to buy WaMu Finance Group's Mississippi offices. WaMu's prepared statement specifically refers to the $71 million predatory lending verdict against WaMuFi's operations on Mississippi.  The Seattle Times reports that "Washington Mutual says it will continue to operate 18 Mississippi branches of Washington Mutual Finance, the controversial subprime-loan unit it is selling to Citigroup. Inner City Press, a consumer-advocacy group, said yesterday that the branches were excluded from the $1.25 billion transaction because of a $71 million predatory-lending verdict against the WaMu unit in Mississippi last year. The Mississippi branches weren't mentioned in statements by WaMu and Citigroup on Nov. 24 announcing the deal." The Seattle Post-Intelligencer reports, " Inner City Press contends that if Citigroup believes it is escaping the predatory-lending issues raised in the Mississippi case by excluding offices in those states, it's mistaken." Yep...  Citi's spin, contained in the American Banker of Dec. 16, is that it's only not buying in Mississippi because WaMu, for no reason at all, is "liquidating" its operations in the state. The Mississippi regulator, John S. Allison, is quoted that neither WaMuFi nor Citi have ever done anything wrong in his state. He provided a similar letter for WaMu two years ago. Policy question: this is the state consumer protection one's supposed to rally around? For shame (and, developing...).

   On BofA, the plot thickened last week, with the Massachusetts congressional delegation calling, in their nuanced way, for public hearing(s) on BofA's proposal. Even without that joint letter, it seems clear that the Fed would have to hold a public meeting on a $47 billion bank mega-merger which would go over the 10% deposit cap included in the 1994 interstate banking law. But this should nail it down. Here's a bit from ICP's fourth comment, the portion continuing the alphabetical review of BofA's 2002 lending:

    Now that numerous members of Congress have added their voices to the demands for public hearings on this proposal, it would seem clear that the Fed must holding public meetings. The precedent, ICP contents, is Fleet - Shawmut, on which the Fed held three public meetings: in Boston, Hartford and Albany. This BofA proposal is substantially larger and even, ICP contends, violates the 10% deposit cap that Congress included in the 1994 Interstate Banking Bill. At LEAST three meetings should be held.

   ICP continues to await the FRB's response to ICP's December 8 FOIA appeal, and some response from BofA which, unlike BofA's Dec. 3 submission, is at least somewhat substantive, particularly on its lead bank's standardless purchase of subprime loans from Option One and Accredited Home Lenders, Inc., and its securitization for a wide range of questionable subprime lenders. In the interim, ICP has continued with its alphabetical review of BofA's 2002 lending.

   K is (also) for Kansas City. In the Kansas City Metropolitan Statistical Area ("MSA") in 2002, for conventional home purchase loans, BofA denied the applications of African Americans 2.46 times more frequently than those of whites, and denied the applications of Latinos 3.33 times more frequently than whites. For refinance loans in the Kansas City MSA, BofA in 2002 denied the applications of African Americans 3.5 times more frequently than whites, and denied the applications of Latinos 3.67 times more frequently than whites: both disparities higher than for the HMDA-reporting industry as a whole (the "aggregate").

  L is (also) for Las Cruces, New Mexico -- in this MSA for conventional home purchase loans in 2002, BofA denied the applications of Latinos a whopping 4.49 times more frequently than whites. This disparity is much worse that the aggregate -- and than the past record of the Boatmen's Bancshares subsidiary through which BofA entered this market. As elsewhere, BofA's entry results in a deterioration of performance.

    M is (also) for Myrtle Beach, South Carolina. In this MSA in 2002, for conventional home purchase loans, BofA denied the applications of African Americans 4.25 times more frequently than those of whites, and denied the applications of Latinos 4.82 times more frequently than whites. For refinance loans in the Myrtle Beach MSA, BofA in 2002 denied the applications of African Americans 3.11 times more frequently than whites, and denied the applications of Latinos 4.67 times more frequently than whites: both disparities higher than for the aggregate.

    N is (also) for Norfolk, VA -- in this MSA in 2002, for conventional home purchase loans, BofA denied the applications of African Americans 2.85 times more frequently than those of whites; for refinance loans, BofA denied the applications of African Americans 3.21 times more frequently than whites, and denied the applications of Latinos 2.62 times more frequently than those of whites.

    O is (also) for Orlando, Florida. In this MSA in 2002, for conventional home purchase loans, BofA denied the applications of African Americans 2.85 times more frequently than those of whites, and denied the applications of Latinos 2.54 times more frequently than whites.

    BofA's disparities are systemic; they are nationwide: upon analysis, the record of each bank acquired from the command center in Charlotte deteriorates after it is acquired. As reviewed in Section III of ICP's First Comment, and hereinabove,, while BofA disproportionately denies protected classes its normal interest rate credit, BofA assists, enables and purchases from some of the most problematic subprime lender, which target people of color for high interest rate loans. The requested public hearings -- at least three of them -- should be scheduled, and, on the current record, BofA's application could not legally be approved. Until next time, for or with more information, contact us.

December 8, 2003

   Of Bank of America we can only say: power corrupts. Having taken more than two weeks to prepare a response to the 30-page comment submitted by ICP/Fair Finance Watch (click here to view), BofA has come back with a slew of vague assurances and arrogant claims that the Federal Reserve Board should not even consider these issues, including Bank of America, N.A.'s purchase of subprime loans from New Century, Option One, and other problematic subprime lenders. But the Office of the Comptroller of the Currency's CRA performance evaluations of BofA, NA do not even mention these subprime loan purchases. Strange bank, strange agencies -- and time for a hearing. ICP has continued with its alphabetical review of BofA's 2002 lending, here's F through H:

   F is for Fayetteville NC. In the Fayetteville MSA in 2002, for conventional home purchase loans, BofA denied the applications of African Americans 5.24 times more frequently than those of whites. For home improvement loans in the Fayetteville MSA, BofA in 2002 denied the applications of African Americans 4.69 times more frequently than whites, while having a 100% denial rate for applications from Latinos. G is for Greenville, South Carolina -- in this MSA for conventional home purchase loans in 2002, BofA denied the applications of African Americans 2.61 times more frequently than whites, and denied the applications of Latinos 3.47 times more frequently than whites. For home improvement loans, BofA denied African Americans 2.3 times more frequently than whites -- while having a 100% denial rate for applications from Latinos. H is for Hickory, NC -- in this MSA in 2002, for refinance loans, BofA denied the applications of African Americans 3.23 times more frequently than whites, and denied the applications of Latinos 4.03 times more frequently than those of whites.

   Click here for more, and for Inner City Press' ongoing updates of the BofA-Fleet proceeding.

   At the level of the states, ICP's December 1 comments to regulators in 25 states opposing Citigroup's proposal to acquire over 400 subprime lending offices of Washington Mutual Finance Group have resulted, one week on, in responses from seven states: four in writing, and three only oral, so far. We'll review in this space an indicative response: in a fit of candor, the Kentucky Department of Financial Institutions has responded that:

"We have received numerous complaints against Washington Mutual, most concerning their failure to properly credit customers' accounts but, unfortunately, the Department does not have copies of those complaints. The lady who handles consumer complaints was under the mistaken impression that anything having to do with Washington Mutual was not to be handled by our Department but was to be forwarded to the Office of Thrift Supervision. She thought, since the banking business of Washington Mutual was federally regulated, that the consumer loan business of Washington Mutual was also federally regulated. She has no record of the number or content of such complaints registered over the past three years old than a knowledge that many of the complaints concerned a failure to credit customers' accounts resulting in complaints of unauthorized threat of foreclosure. We will attempt to work with you in this matter. We appreciate your concern and invite further correspondence."

   There will be more. For now, Inner City Press has submitted a Freedom of Information Act request to the Office of Thrift Supervision, for documents including this mis-forwarded complaints against Washington Mutual Finance Group, and Citigroup-related complaints. Developing...

   Finally, for this week, a plug and a link: Commonweal magazine of Dec. 5, 2003, under the heading "Critics' Choices for Christmas," says this of Predatory Bender: "as vivid an account of life in the Bronx as you are likely to read; more than that, it is a brilliant act of subversion, for within the thriller plot is found a dramatic account of the ways corporations prey on the poor while the rest of us aren't looking."

   Speaking of looking, ICP's Constitutional challenge to the Delaware Freedom of Information Act's "citizens-only" provision is proceeding, having been assigned to Judge Joseph Farnan, is now described on (click here to view); a editorial in the Wilmington News-Journal of December 4, 2003, "Our View: Change the State's Open Records Statute So It Applies to All," recounts ICP's "federal lawsuit asserting Delaware's open-records law is unconstitutional because it refuses access to non-residents," then opines that the "exclusion is silly and probably unconstitutional. The General Assembly should attend to this when it returns to session next month." We'll see.

December 1, 2003

   Late on Monday, November 24, Citigroup announced a proposal to acquire over 400 subprime lending offices in 25 states from Washington Mutual, for $1.25 billion. Reporters were told of the deal by Citigroup's press flacks at 7 p.m., while some of them were fawning around Citigroup's prized show dog, Robert Rubin. No one, apparently, dared ask the ex-Treasury Secretary: why are you the front-man for a predatory lender? Soon Mr. Rubin jetted west to San Francisco. Twenty-eight of the WaMu Finance offices at issue are in California; on the other hand, sixty are in Tennessee. Press accounts described WaMu Finance as serving small town America; Citigroup emphasized the "footprint" in Florida and Texas, shamelessly equating Latino with subprime. Thirty-six of the offices are in Louisiana, and 37 in North Carolina. The reality is, there are more WaMu Finance offices in Tennessee than in Texas, and more in North Carolina than in Florida. This is CitiFinancial targeting Subprime Central -- we are Inner City Press have a name for this: Predatory Bender, it's what Citi's on.

    On that front, the American Banker of Dec. 1, 2003, says that the novel "draws from years of challenging bank mergers and lending practices, and appears to blend the images of companies such as Citigroup Inc. and Bank of America Corp... [ICP will] fight Citigroup's deal, announced last week, to buy Washington Mutual Inc.'s consumer lending unit." Well, yeah -- Inner City Press has now filed comments and exhibits opposing Citigroup's WaMu Finance proposal, and asking for investigations of CitiFinancial, with regulators in 25 states, each is viewable by clicking the name of the state: Alabama, California, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maryland, Mississippi, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, West Virginia.

   To the American Banker report, above, that Predatory Bender's "Empibank" blends (merges?) Citigroup and Bank of America, one could add Wells, AIG's American General Finance, and HSBC's Household. On that, last week saw (at least) two settlement announcements about Household International. Without any disrespect for the settlers, we're compelled to note that even after the Attorneys General's settlement, and now pending settlements of purported class actions, most of Household's business remains unreformed and still predatory. No changes have been made to Household's non-mortgage consumer lending; most absurdly, the announced reforms do not apply to mortgage loans Household makes through brokers, through its Decision One unit and otherwise. Meanwhile, on Thanksgiving Day itself, guess who was pontificating in London? None other than Wild Bill Aldinger, a/k/a "Where's Aldo?" -- speaking at HSBC's presentation of its new five year plan, "Managing for Growth," Aldo said, "We expect very confidently at the end of this year to have double digit receivable growth. We are pretty well positioned for next year." Yep -- settlements in place, ready to keep ripping people off, globally now...

   And so the battles continue, heating up in the holiday season. On November 24, Inner City Press filed a lawsuit against Delaware Governor Minner, and the state's Attorney General, for enforcing an unconstitutional provision of Delaware's Freedom of Information Act, limiting the right to documents to residents of the state. Click here for the Wilmington News-Journal's article (also onsite here).

November 24, 2003

   Last week, Inner City Press / Fair Finance Watch filed a 30-page challenge to Bank of America's applications to acquire Fleet. As documented in detail in ICP's comments, click here to view, there are lending disparities, the deal would go over the ten percent deposit cap, Bank of America (and NationsBank before it) have a record of buying banks and then mis-serving the target communities (on this last, ICP used New Mexico as its example, but California, Hawaii and other states demonstrate this trend as well). But of perhaps most interest and relevance to this Report is the fact that Bank of America is still deeply involved in questionable subprime lending, not only as an underwriter but as a purchaser of loans. Surprising, in light of the debate throughout 2003 about whether national banks are involved in predatory lending, Bank of America, N.A. is the unit which buys the loans from Option One, and Accredited Home Lenders, Inc. Readers of this page will remember that Option One applied for a thrift charter, that ICP and other opposed based on predatory lending, and that Option One withdrew its application. Accredited Home Lenders, Inc. shows similar patterns, as sketched in ICP's comments. Also surprising, in light of some of the support that BofA is trotting out, including that of firmly committed Wells opponents: Bank of America pools and sells the controversial subprime loans of Wells Fargo. Some of the deals are:

CIK                Company                                                 State

SIC: 6189 - Asset-Backed Securities

SIC: 6189 - Asset-Backed Securities



   ABFC is Asset Backed Funding Corporation, 100% owned by Bank of America... The game around the ten percent deposit cap, too, is interesting. On that, ICP has now submitted a second comment, dated November 24, which specifies that "[t]o the FDIC's June 30, 2003, count of deposits, BofA proposes adding some $43 billion of thrift escrow funds, arguing that "deposits" for purposes of the ten percent deposit cap is defined in 12 USC 1813(l). But as ICP has pointed out, §1831(l)(5)(A) explicitly EXCLUDES from the definition, "for any purposes of this Act... any obligation of a depository institution which is carried on the books and records of an office of such bank or savings association located outside of any State" [with certain exceptions which do not apply here]. This would exclude Puerto Rico, the U.S. Virgin Islands, American Samoa, Guam -- as well as Palau, the Marshall Islands, Micronesia and the Northern Mariana Islands. The deposits of each are as follows, according to the FDIC's deposit data base:

American Samoa $135 million; Micronesia $119 million; Guam $1,748 million; Marshall Islands $30 million; Northern Mariana Islands $504 million; Palau $83 million; Virgin Islands $1,343; and Puerto Rico $40,263 million.

   These add up to over $44 billion -- more even that the thrift escrow funds that Bank of America proposes to include. Thus, even if one included the thrift escrow funds in the amount specified by BofA, the proposed combined companies would control 10.02542% of nationwide deposits of $5,129,370,000,000. ICP contends that the thrift escrow funds should not be included, leaving the proposed combined companies with 10.1118% of nationwide deposits of $5,085,548,000,000. Since the Fed "may not approve an application for an interstate merger transaction if the resulting bank upon consummation of the transaction, would control more than 10% of the total amount of deposits of insured depository institutions in the United States," BofA's application must be denied. Also, ICP's alphabetical review of Bank of America's 2002 lending has continued, starting again at the top (this time, A-D):

    A is (also) for Austin -- In 2002 in the Austin, Texas, Metropolitan Statistical Area ("MSA"), for example, for conventional home purchase loans, BofA denied the applications of Latinos 3.02 times more frequently than those of whites. In Austin and in most other MSAs, BofA's disparities for refinance loans were also high, for both Latinos and African Americans. In 2002 in this MSA, BofA denied the refinance applications of Latinos 2.78 times more frequently than those of whites, and denied the refinance applications of African Americans 2.89 times more frequently than whites.

   B is (also) for Boston. In the Boston MSA in 2002, for conventional home purchase loans, BofA denied the applications of Latinos 2.86 times more frequently than those of whites. For refinance loans in the Boston MSA, BofA in 2002 denied the refinance applications of African Americans 3.54 times more frequently than whites.

     C is (also) for Charleston, South Carolina -- in this MSA for conventional home purchase loans in 2002, BofA denied the applications of African Americans a whopping 5.19 times more frequently than whites. For refinance loans, BofA denied African Americans 4.45 times more frequently than whites -- and denied Latinos fully 5.88 times more frequently than whites.

    D is (also) for Dallas -- in this MSA in 2002, for conventional home purchase loans, BofA denied the applications of Latinos 2.46 times more frequently than those of whites, and denied the applications of African Americans 2.28 times more frequently than whites. For refinance loans, BofA in 2002 denied the applications of Latinos 2.44 times more frequently than those of whites, and denied the applications of African Americans 2.54 times more frequently than whites

   BofA's disparities are systemic; they are nationwide: upon analysis, the record of each bank acquired from the command center in Charlotte deteriorates after it is acquired. As reviewed in Section III of ICP's First Comment, while BofA disproportionately denies protected classes its normal interest rate credit, BofA assists, enables and purchases from some of the most problematic subprime lender, which target people of color for high interest rate loans. The requested public hearings should be scheduled -- in 2004 -- and, on the current record, BofA's application could not legally be approved.  

November 17, 2003

   The news of the week is the beginning, rather than end, of story: on Friday, November 14, Bank of America reportedly submitted to the Federal Reserve its applications to acquire FleetBoston Corporation. Inner City Press / Fair Finance Watch immediately submitted a Freedom of Information Act request (a portion of which in this week's ICP Bank of America Report, click here to view). We say "reportedly," because we h haven't seen it yet. But the Fed did post notice of the application, saying that the (initial) comment period runs through December 15. In the run-up to the proceeding, let's consider the Federal Reserve's recently actions on applications. Here, it's reported that the Fed is trying to help Bank of America stay under the ten percent deposit cap that Congress enacted in the 1994 interstate banking law. It wouldn't be the first time -- consider the Fed ignoring and changing the Glass Steagall Act, in connection with Citicorp-Travelers in 1998.

   To ICP's October 2, 2003, inquiries, including under FOIA, only two of the 12 Federal Reserve Banks have responded. We previously reported on the FRB of Boston having (correctly) provided ICP with a copy of Royal Bank of Scotland's request for a waiver (which request RBS subsequently withdrew, and submitted an application). Well, last week we received, by regular mail, the FRB of Chicago's response. It was limited to the question of Bank One proposing to charter three banks, and why no application was submitted. In fact, the FRB of Chicago now says that not even a waiver request was required. Bank One's lawyer, at Wachtell Lipton, submitted a waiver request on September 8. (Then the FRB of Chicago claimed there was not such filing pending, see Reports of previous weeks). Now we learn that on September 26, Bank One's lawyer wrote in with a new argument: the proposed banks would not even BE banks, as defined in Section 2 of the BHC Act. Innovative -- and sleazy. Bank One asked for a waiver, then that got opposed; then Bank One said, and the FRB of Chicago ended up agreeing, that no waiver need even be requested. Then the FRB of Chicago waited more than a month to disclose the whole game (hoping, it seems, that the Morgan Chase - Bank One transaction could be completed first). And the other ten Reserve Banks?  Who knows -- we'll be following this up.

   On November 10 and 12, we received responses by PNC, this time by their Chief Regulatory Officer, Jack Wixted (who until recently worked in the Federal Reserve System). Actually, that's of concern -- where are the "revolving door" safeguards which, at most government agencies, prohibit a recent official from representing private interests before the agency he or she just left. We've raised the issue (see this week's ICP Bank Beat for more).  State-by-state action, on redlining and predatory lending, is addressed in this new ICP map, which may be of use during the BofA-Fleet process -- click here to view and use.

November 10, 2003

   Citigroup's two-tiered financial system, and how it treats its employees: there are variations but a lot of similarities too. Take, for instance, Citi's subprime lending CitiFinancial, and its subpar insurer, etc., Primerica. News reaches us this week of a 19-year Primerica employee who suddenly realized that an insurance product he'd been selling at Primerica for $361 a month was sold by another Citigroup unit, Travelers Life, for $178 a month. Identical product, sold at double the price to a more down-market (and more "minority") customer base. The man quit Primerica, which now, along with Citigroup, is suing him. The charge is failure to abide by a non-competition clause Primerica makes its employees sign: that they will not recruit customers or employees within fifty miles of their home or office. But the vehemence of the suit is clearly intended to scare other employees from blowing the whistle, or even from leaving the company. It's consistent with what we've been hearing, in great detail, from employees throughout Citigroup...

    Jump-cut, though not a big leap -- we try not to be self-serving, much less crassly commercial -- but if we didn't use this space to announce the availability of Inner City Press' new book, "Predatory Bender," it'd mean we didn't believe in the book, right? And we do. So click here for more information, including sample chapters. It is also available for direct credit card order here (this is the fastest way), through,, Barnes and, etc.. Freedom of the press...

  Finally, this week, a reminder from the mailbag of what's going on out there:

Subj: US Bank has run the history of our Mortgage and took our house
Date: 11/7/03 8:03:50 PM Eastern Standard Time
From: [ ]
To: PredWatch [at]

...In October we lost our house due to an out of control Mortgage situation that was not due to our failing except signing the papers.... When we refinanced the last time we were told "We were Targets", now I know what they meant, we were from the first financing with Green Tree in '97 or 98. With each company we dealt with our payments got lost, we were overcharged, things were charged and changed without our knowledge, we were even given a second mortgage without even knowing about it until we had our yearly taxes done. Each time we refinanced it was to get away from that company, now I know the next one was affiliated with the same parent company.

As I said, it has now come down to an empty house setting in the middle of the block and no one can figure out how to buy it. It is not listed as 'a sale', it's not listed as a foreclosure - even though the Judge set the Sheriff date, and it's being overseen by a woman that is part of the Century 21 office here in town, and the Office Manager knows nothing about the house at all! We were never notified to move out, we never received any documents on the foreclosure except from the sheriff's office. Just the letter to go to the hearing for the Judge to tell us to move on Oct. 6, 2003. I have tried contacting various Gov., State, and local offices and most of them tell me to file a complaint, but "nothing may come of it". I'm sick, mentally and physically now after 5 to 6 years of hassle and fighting over this. I don't have resources to hire any lawyer because we are right at borderline poverty, which means we don't qualify for help and we can't afford to pay for it ourselves. I guess I just feel better if I know someone has an idea of what we have been going through, and that my children now know that we didn't put them through this out of total ignorance....

   Until next time, for or with more information, contact us.


November 3, 2003

   Of Bank of America and Fleet, we'll have much to say in coming weeks. News of the deal broke early on the morning of October 27 -- before the markets opened, ICP had up some analysis of Bank of America's 2002 mortgage lending, finding disparities in city after city. Some in the media seem eager to find splits in the consumer activist community. The focus should be on the merger, on affected neighborhoods. The data (preliminarily reviewed here) speaks for itself, to a large degree. Tales of partnership too, of course, have their place. But they don't tell the whole story. For that, public hearings will be needed. More on that in coming weeks.

   This week, ICP received Freedom of Information law responses regarding Chase and HSBC's Household. Neither were pretty. At the New York Banking Department, from October 1, 2000 to June 25, 2003, over 500 consumer complaints were filed against Chase Manhattan Mortgage Corp., A small sampling:

6/25/03 Mortgages - Privacy Issues - Valid - 03 M 1573

6/19/03 Mortgages - Escrow account, non-payment of taxes from - Valid - 03 M 1533

6/16/03 Mortgages - Release of satisfaction - Valid - 03 M 1502

6/13/03 Mortgages - Release of satisfaction - Valid - 03 M 1491

6/12/03 Mortgages - Release of satisfaction - Valid - 03 M 1485

6/09/03 Mortgages - Payment not posted to account - Valid - 03 M 1453

   Other complaints acknowledged as "valid," even by the New York Banking Department, were for "Foreclosure" (Valid, o3 M 236); "Loan Terms Changed" (Valid, 03 M 133); "Closing Delays" (Valid, 03 M 676); "Foreclosure" (Valid, 03 M 843); "Insurance Funds - Difference FDIC and Other" (Valid, 03 M 869); etc. And so what's up (and will be up) with Morgan Chase's applications to the OTS, FDIC and Delaware to convert to a federal savings bank and evade all state consumer protection laws and agencies?

   On HSBC, we're finally able to report on the fight surrounding Inner City Press' Freedom of Information Act request to the Connecticut AG's office, back on Jan. 10, 2003. It requested complaints against Household, and, among other things, records reflecting any consideration given to expanding the settlement to include Household's loans through brokers (Decision One, etc.), in light of HSBC's then-proposed recapitalization (and acquisition) of Household. The Connecticut AG's office gave some documents and withheld others; its agreement and Consent Decree with Household, like other states, requires it to provide Household (now HSBC) with notice of any FOIA request for documents "concerning" Household and/or the negotiation. This seems, to ICP and some others, to constitute an impermissible privatization of FOIA. ICP filed an appeal to the Connecticut Freedom of Information Commission (FOIC) and waited for the day of oral argument, October 7, 2003. But that date was adjourned, at the other side's request. Thereafter, with the FOIC playing intermediary, an arrangement was reached under which the Connecticut AG's office released copies of complaints against Household, and made the following representations, in an Oct. 24, 2003, letter to ICP:

"Pursuant to your request for clarification... in accordance with paragraph 40 of the consent judgment entered into between Household and the States, this Office is only obligated to notify Household of any FOIA requests for documents that were either provided to the States by Household, or otherwise contain Household's proprietary information that would be exempt from disclosure... as confidential commercial or financial information."

[ICP note: we appreciate the "clarification," and accept it, in a sense, as to Connecticut -- but that is not what the consent judgments say; they provide for notifying Household of any requests "relative to... the negotiation of the Agreement in Principle of this Consent Judgment," etc. -- i.e., requests regarding the Attorneys General's communications, regardless of whether the communications contain Household's proprietary commercial or financial information. We still think it violates the FOI laws of Connecticut and other states -- but the FOIC is not the venue to pursue that in.]

   The Connecticut AG's Office's letter to ICP also certifies that it is providing "all documents in the possession of this Office concerning 'how and why the scope of the predatory lending settlement with Household was limited.'" Annexed are AG Blumenthal's response to ICP's December 2002 letter (described below on this page), and e-mails among some of the AGs' offices (disseminating a draft blow-off letter written by the Washington State AG's Office's staff). That these are the only responsive documents is troubling to ICP -- but, again, the FOIC is not the venue in which to pursue this.

   What we can say is that interest in and scrutiny of the predatory practices of Household-now-HSBC is growing, including beyond the United States. We also offer, this week, some whistleblowing tales regarding what it's like to work inside these banks - click here to view ICP's Bank Beat, where the example given is Pittsburgh-based PNC, but we've heard similar stories, from inside Fleet and Bank of America. Before a community or consumers' group praises this proposed merger, they should consider it from all the angles. We'll leave it at that for now -- we're in listening mode. So tell us what you think - contact us.

October 27, 2003  Click here for ICP's Oct. 27, 2003, statement on Bank of America - Fleet

   Preemption and regulatory capitulation -- these are abstract concepts, but they impact on consumers and communities. Since late summer, when it stumbled on notice of Morgan Chase's application to the Office of Thrift Supervision to open a savings bank and make over 300 offices of Chase Manhattan Mortgage Corp. into federal thrift branches, exempt from state consumer laws, ICP has been opposing the proposal. Two weeks ago, ICP noted that OTS Director Gilleran had pointed, as evidence of the OTS' continuing viability, to Chase's application; ICP wrote, and the American Banker published, a letter to the editor questioning whether the OTS Director was improperly prejudging a pending, protested application.

   Well, it's actually worse than that. An October 22 American Banker article about another institution trying to shift to the OTS quoted "Kevin Petrasic, an OTS spokesman" that the OTS "had been talking with Hudson City Bancorp about making the switch for some time and had factored the assessment revenue it would likely generate into the agency's budget for the second half of next year. The conversion to a federal charter would immediately make Hudson City the 10th-largest thrift regulated by the OTS." (Emphasis added).

  This means that the OTS starts counting "assessment revenue" with regards to institutions which apply for thrift charters even before they apply, while the comment periods are open, and while protests and hearing requests are pending. Beyond the obvious (and inappropriate) prejudgment at issue here, it is plain sad that Congress has left thrift regulation in the hands of an agency so hard-up for money it must engage in accounting tricks like counting projected future income or "assessment revenue." This is no way to regulate savings banks, much less to protect consumers. Inner City Press has now filed a Freedom of Information Act request with the OTS, for all record showing any consideration of the proposed Chase FSB (or other institutions) in future OTS budgets, in the "second half of next year" or before or after. Even pending the response -- which ICP has asked for on an expedited basis -- this make it even more clear that the OTS should hold public hearings on Chase's stealth applications, at a minimum to clear the air...

  A few updates: last week's foray into (and against) New Haven Savings Bank's proposal to go public and buy two banks was covered in the New Haven Register -- and in an op-ed in the Yale Daily News, click here to view); also last week, the Federal Reserve granted ICP an extension of time to comment on PNC-United, until October 29 -- by then we should have PNC's response, such as it will be. Citigroup last week announced it's hiring the ex-banking and financial services Commissioner of Maryland, to flack for CitiFinancial; ICP's put in a FOIA request to the Maryland agency for its follow-up (if any) on the conditions imposed on HSBC-Household, and for the ex-Commissioner's communications with or about CitiFinancial.

   Finally, for this week: Inner City Press, having in early August commented on and against Citigroup's application to the Office of the Comptroller of the Currency to acquire Sears' credit cards and financial services business, received by mail the OCC's approval order. On the issues raised, the OCC's order -- actually, it's just a nine-page letter from the OCC's Licensing Manager for large or "multi-national" banks -- is woefully inadequate. Citigroup, which only recently settled charges of predatory lending, has stated it will market subprime loans to Sears' customer base. But the OCC argues that "many of the concerns raised dealt with Citigroup entities that are not parties to this transaction, are non-bank subsidiaries of Citigroup, or are institutions regulated by other federal agencies... The OCC has no regulatory or supervisory authority over any of the Citigroup entities mentioned by the commenters that conduct subprime lending, such as CitiFinancial Credit Company, because none of these entities are national bank or subsidiaries of national banks."

    Pshaw. Citigroup has said it will market CitiFinancial's products to the customers of Sears National Bank -- so the argument that CitiFinancial is not "a party to the transaction" is a weak legalism. And while the OCC may not be the examiner of CitiFinancial, if the effect of a Bank Merger Act proposal before the OCC is to expose customers of the target national bank to products from a company widely alleged -- including by government authorities -- to be predatory, the OCC must act on this.

   The OCC's staged disempowerment is particularly strange given the Comptroller's current campaign of preempting state anti-predatory lending laws. To be seeking to occupy the field of regulation, and then refusing to regulate, is a contradiction which is harming consumers... 

October 20, 2003

    Our focus this week: a controversial proposal by New Haven Savings Bank to convert from mutual to stock ownership and to acquire two other banks. The mayor of New Haven and numerous state legislators have opposed it, but the banks have seemed to batten down the hatches, take out paid advertisements and try to weather the storm. But NHSB's lending record is strikingly disparate. So Inner City Press / Fair Finance Watch on October 20 filed comments with the FDIC, Federal Reserve and the Connecticut Banking Department.

    The 2002 Home Mortgage Disclosure Act data reported by NHSB show that NHSB disproportionately excludes African Americans and Latinos from its lending. In 2002 in the New Haven Metropolitan Statistical Area, for conventional home purchase loans, NHSB denied the applications of Latinos 3.67 times more frequently than those of whites. For home improvement loans, NHSB denied Latinos 2.52 times more frequently than whites -- and denied the applications of African Americans 3.15 times more frequently than whites.

   Each of these NHSB denial rate disparities is worse than those of the industry aggregate in New Haven. For example, for home improvement loans the aggregate denied Latinos 1.98 times more frequently than whites, and African Americans 1.90 times more frequently than whites (significantly lower than NHSB's disparities of 2.52 for Latinos and 3.15 for African Americans).

   NHSB's disparities are not explained by any greater-than-normal outreach to underserved communities. Quite the contrary: while NHSB in 2002 in the New Haven MSA made 275 home improvement loans to whites, and only 13 to African Americans and only seven to Latinos, the aggregate made 931 such loans to whites, 79 to African Americans and 60 to Latinos. Within these three groups, only 4.41% of NHSB's loans were to African Americans (less than the aggregate's 7.38%); only 2.37% of NHSB's loans were to Latinos (less than the aggregate's 5.61%). Said otherwise, while NHSB had a 29.5% market share of all reported home improvement loans to whites in New Haven in 2002, it had only a 16.5% market share of loans to African Americans, and only an 11.7% market share of such loans to Latinos.

   Before proceeding to assess the fairness of NHSB's lending in the New London and Bridgeport MSAs, it should be noted that in New Haven in 2002, NHSB denied the refinance applications of African Americans 4.33 times more frequently than whites, almost double the aggregate's disparity of 2.41. Again, this is not explained by any greater-than-normal outreach to African Americans by NHSB: among African Americans, Latinos and whites, only 3.19% of NHSB's refinance loans were to African Americans (less than the aggregate's 4.64%); only 1.2% of NHSB's refinance loans were to Latinos (less than the aggregate's 2.9%). Similarly, only 3.75% of NHSB's conventional home purchase loans were to African Americans (less than the aggregate's 6.65%); only 1.56% of NHSB's conventional home purchase loans were to Latinos (less than the aggregate's 5.21%). In its headquarters MSA, NHSB disproportionately denies and excludes African Americans and Latinos. Now it proposes to acquire two other banks (see below), and to convert from mutual to stock form, making itself even less accountable. ICP has requested a public hearing, and the denial of NHSB's applications.

   NHSB's record in Bridgeport is hardly better. For example, for home improvement loans in Bridgeport in 2002, NHSB denied the applications of African Americans 2.79 times more frequently than whites. Strangely -- and in presumptive violation of the Home Mortgage Disclosure Act and the Equal Credit Opportunity Act -- NHSB for refinance loans in Bridgeport in 2002 reports 132 applications from whites, none of which were denied (122 loans were made). For African Americans, for refinance loans in Bridgeport, NHSB had a 25% denial rate, as it did for Latinos. NHSB's denial rate for whites, on more than 100 application, was zero. This incongruity (to say the least) militates for the public hearings ICP is hereby timely requesting, as does NHSB's near-total exclusion of Latinos in Bridgeport. While making 122 refinance loans to whites, NHSB made only three to Latinos, and three to African Americans. Among these three groups, only 2.34% of NHSB's refinance loans were to African Americans (less than the aggregate's 4.93%); only 2.34% of NHSB's refinance loans were to Latinos (less than the aggregate's 4.34%). Meanwhile, NHSB in 2002 in Bridgeport did not make a single conventional home purchase or home improvement loan to a Latino, despite the aggregate having made 8.3% of race-specified (as above) conventional home purchase loans to Latinos, and 6.1% of home improvement loans to Latinos. NHSB is disproportionately excluding Latinos and African Americans from its lending, not only in New Haven but also in Bridgeport -- and New London, where in 2002 NHSB did not make a single refinance or home improvement loan to a Latino, and no conventional home purchase loans to African Americans. These disparities militate for the requested public hearings, and for the denial of NHSB's applications to acquire SBM and Tolland Bank, the lending records of which will now be addressed.

    Savings Bank of Manchester, like Tolland Bank, only reported 2002 HMDA data for the Hartford MSA. While the focus of ICP's comments and hearing request is on NHSB, it is worth considering the current records of the banks that NHSB is seeking to acquire. While the aggregate in the Hartford MSA in 2002 made 645 conventional home purchase loans to African Americans, 562 to Latinos and 12,620 to whites, the numbers for SBM were strikingly different: 558 loans to whites, only five to African Americans, and only five to Latinos. Within these three groups, less than one percent of SBM's loans were to African Americans (far less than the aggregate's 4.7%); less than one percent of SBM's loans were to Latinos (far less than the aggregate's 4.1%). Said otherwise, while SBM had a 4.4% market share of all conventional home purchase loans to whites in the Hartford MSA in 2002, it had only a 0.78% market share of loans to African Americans, and only an 0.89% market share of such loans to Latinos. Meanwhile, SBM denied the conventional home purchase loan applications of Latinos 3.86 times more frequently than whites. Tolland Bank in 2002 in Hartford made 90 conventional home purchase loans to whites, only two to African Americans, and none to Latinos. SBM and Tolland Bank are already disproportionately excluding African Americans and Latinos from their lending; sell-out to the disparate NHSB would only make matters worse.

   Even beyond the glaring disparities identified above, the proposal would result in branch closures and other reductions of service. See, e.g., the Hartford Courant of August 7, 2003, quoting a NHSB senior vice president that "we do acknowledge that there is some overlap in the market area," in relation to branches in Coventry (and by implication elsewhere in the affected communities). All branch closing and service plans should be disclosed; a vote of NHSB's depositors should be required, and a public hearing held. ICP has formally requested that NHSB's applications be denied.

   To the FDIC, ICP has noted the American Banker of September 11, 2003, which quoted an FDIC spokesman that "New Haven Savings has filed a request for a waiver but the agency has not decided yet whether to grant it" -- ICP's comment is in opposition to any such waiver, and/or to revoke any waiver given by the FDIC. Federal mutual savings banks have to poll the depositors; the FDIC is alone in allowing, on a case by case basis, a dodge of the depositors (and of democracy). This will be updated.

   Following last week's PNC filing, an Associated Press report in the Bergen (NJ) Record and elsewhere quoted PNC spokesman Brian Goerke that PNC "will respond appropriately with any matters raised" during the acquisition approval process. We'll see. Meanwhile, Inner City Press has been contacted by a number of PNC employees alleging discrimination in how the bank is run, and not only its effects... ICP is vetting these stories, including for use in reply to PNC's (still-not-received) response...

   Welcome to hell -- last week Citigroup said-in-a-statement that it has appointed a Director of Global Compliance -- a lateral hire from Deloitte & Touche and before that the Office of the Comptroller of the Currency (OCC), Mr. Thomas F. Rollauer. One of the hells we're referring to is CitiFinancial, whose predatory practices are described in detail in ICP's ongoing CitiWatch Report  But we're also left wondering about the propriety of the OCC's examiner-in-charge of Citibank now going to work to Citibank itself...

October 13, 2003

    Our focus this week: PNC's proposal, announced on August 21, to acquire United National Bancorp and its 52 branches. PNC's lending record, as reflected by 2002 data, is disparate. But most striking to us is that PNC has been embroiled in accounting fraud scandals a la Enron, and that the Federal Reserve (and perhaps also the Office of the Comptroller of the Currency) are so surprisingly forgiving. In announcing this proposal, PNC's CEO James Rohr bragged that he'd already reviewed the deal with PNC's regulators. But the Fed's Deputy Secretary responded to on October 10 response to a Freedom of Information Act request which Inner City Press filed on September 19 did not include any reference to such discussion between the Fed and PNC. One might ask: is PNC lying? Or is the Fed (in its FOIA response, we mean -- and we've appealed). Here now a portion of the comments which ICP Fair Finance Watch filed with the Federal Reserve and OCC on October 13:

  In 2002 in the Philadelphia Metropolitan Statistical Area ("MSA"), for conventional home purchase loans, PNC Bank N.A. denied loan applications from Latinos 3.08 times more frequently than applications from whites. This is worse than other lenders in this MSA: the denial rate disparity between Latinos and whites for the industry as a whole in Philadelphia in 2002 was 2.23.

  PNC's other bank, PNC Bank Delaware, in 2002 in the Wilmington DE MSA for conventional home purchase loans denied loan applications from African Americans 3.39 times more frequently than applications from whites. (PNC Bank Delaware had a 100% denial rate for African Americans for conventional home purchase loans in the Philadelphia MSA in 2002).

   PNC Bank N.A., which has over 50 branches in Kentucky / Southern Indiana, in 2002 in the Louisville KY-IN MSA for conventional home purchase loans denied loan applications from African Americans 2.62 times more frequently than applications from whites.

  It's not possible (nor worth it) to calculate disparities for PNC Bank N.A.'s conventional home purchase lending in 2002 in the Newark and Bergen-Passaic MSAs in New Jersey -- in both MSAs, PNC Bank N.A.'s denial rate for African Americans was 100%.

  Beyond PNC's disparities in the important conventional home purchase loan category, ICP has analyzed PNC's home improvement lending, and finds similar or worse disparities. In 2002 in the Philadelphia MSA, for home improvement loans, PNC Bank N.A. denied loan applications from Latinos 3.03 times more frequently than applications from whites (and denied applications from African Americans 2.88 times more frequently than applications from whites).

  In 2002 in the Pittsburgh MSA, for home improvement loans, PNC Bank N.A. denied loan applications from African Americans 2.13 times more frequently than applications from whites (and denied applications from Latinos 2.24 times more frequently than applications from whites).

  PNC's other bank, PNC Bank Delaware, in 2002 in the Wilmington DE MSA for home improvement loans denied loan applications from African Americans 3.57 times more frequently than applications from whites.

   PNC Bank N.A. in 2002 in the Newark NJ MSA for home improvement loans denied loan applications from African Americans three times more frequently than applications from whites, and denied applications from Latinos 3.22 times more frequently than applications from whites.

  Again, it's neither possible nor worth it to calculate disparities for PNC Bank N.A.'s home improvement lending in 2002 in the Newburg NY-PA MSA -- in this MSA, PNC Bank N.A.'s denial rate for Latinos was 100%.

  Given these lending disparities, on this ground alone the public would be ill-served by allowing PNC to acquire United and its 52 branches. Also for the record: in the analysts' call announcing the proposal, PNC stated that it would close four to eight branches if the proposal is consummated. See, Fair Disclosure Wire of August 21, 2003, Transcript 082103az.713. Mr. Rohr has put the number at "five" (see Bergen Record of August 22, 2003, at B1: "Rohr said that 'only a handful' of branches, in the neighborhood of five, will be closed as part of the consolidation" -- five of 52, 10%, is not negligible); a newspaper in Pennsylvania has questioned how many would be shuttered in PA, and how many in New Jersey (see Allentown, PA Morning Call of August 22, 2003, at A1). The issue is not addressed in the application, at least as it has been provided to ICP. (The Application at 13 refers to costs savings from the "centralization of... branches" -- quite a euphemism). This is another basis for the request for a hearing, and for denial of the applications.  This will be updated; until then, for or with more information, contact us

October 6, 2003

   Stumbling on loopholes: attending unannounced a public hearing on a merger (that of Royal Bank of Scotland's proposal acquisition of Community National Bank), Inner City Press last Monday heard RBS' lawyer allude to a secret approval. He said, "We got a waiver from the Federal Reserve, which means that the Fed is fine with the transaction." ICP, when its turn came, contested this. The Fed didn't give any public notice of RBS' request for a waiver, so how could its granting be given any weight? Later, ICP called the Federal Reserve Bank of Boston, trying to make sure that no more such waivers are given, to banks involved in predatory lending or with questionable Community Reinvestment Act records. Turns out that the first requirement, which the Fed does not make easy, is to even know what waivers are even being requested.

     Quick background: in the past two months, ICP has stumbled upon the Federal Reserve Bank of New York giving a waiver to New York Community Bancorp (whose records of lending to African Americans the N.Y. Banking Department subsequently described as very weak), and on the FRB of Boston handing on one more in a string of waivers to Royal Bank of Scotland. Previously, ICP's comments have managed to get the Fed to deny some waiver requests, including by Chase Manhattan. But again, the problem will be, how to know when waivers are being requested. So:

   On October 2, ICP submitted letters to each of the twelve Federal Reserve Banks, and to the Board, each including a Freedom of Information Act request to be informed and receive copies of waiver requests as they're submitted. To reduce burden for the Fed (we like to do that), we have urged the Fed to being posting notice of waiver requests on the Internet. Here's pertinent portions of ICP's Oct. 2 letter to the Board:

Dear Chairman Greenspan, Governors, Sec't Johnson, others:

On behalf of Inner City Press / Community on the Move and its members and affiliates, and the Fair Finance Watch ("ICP"), this letter and the attachments hereto concern and make formal requests regarding the Federal Reserve System's (not) informing the public of possible waivers of the need to submit applications under the Bank Holding Company Act (the "BHCA") for proposed expansions or mergers, of the type on which the Community Reinvestment Act ("CRA") is enforced.

When a bank holding company applies to acquire a bank or thrift, public notice is provided on the Board's internet H2A. Currently, however, it appears that when a BHC submits a request for a waiver from the need to apply, under 12 CFR 225(d)(2)(v) or otherwise, no public notice is given. ICP has recently had experience of a BHC -- New York Community Bancorp -- refusing to provide information about such a waiver request, until after it was granted. See, Deputy Secretary Frierson's September 12, 2003, letter to ICP; note that only on September 26 did NYCB and its outside counsel withdraw their request for confidential treatment for their July 2003 presentation that they were seeking a waiver from the FRBNY.

NYCB has claimed that the (stealth) waiver meant that the Federal Reserve viewed their proposed transaction, the acquisition of Roslyn Bancorp and Roslyn Savings Bank,, and both institutions' CRA records, in a positive light. In fact, records ICP has subsequently been provided with reflect that, for example, both the FDIC and NYBD are aware of HMDA violations at NYCB (as well as substantive weakness in marketing and lending to African Americans, for example). We believe that the FRS was mis-guided in, and ill-served by, granting the waiver, particularly without having provided any public notice nor accepted any public comment.

Even more recently, at a September 29 public hearing of the Massachusetts Board of Bank Incorporation, counsel to Royal Bank of Scotland / Citizens Financial (RBS) told the MBBI that RBS has "filed with the Federal Reserve Bank of Boston" and had "gotten a waiver" -- and concluded that the Federal Reserve "is fine with" the transaction. Upon questioning, RBS' counsel said that since the FRBB could have denied the waiver request, the granted waiver should be given weight. An inquiry with FRBB staff later that day resulted in it being confirmed to ICP that a Reserve Bank can (and does) deny a waiver request if a comment in opposition is received -- but only, ICP was told, if the comment specifically refers to the proposed transaction, and not only the applicant and its CRA record. But how is this possible, if no notice of pending waiver requests is provided? [Footnote: ICP asked if it should provide the FRBB with a copy of its most recent RBS comments, to be considered on RBS' forthcoming waiver requests; the answer was in the negative, "we won't just hold comments." ICP recited its experience of receiving letters from other Reserve Banks stating that its comments would be so held for 90 days. The distinction seems to be, comments on specific transactions are held; those about applicants are not. The lack of clarity (and consistency) only militate more strongly for what ICP is requesting in this letter: the public notice of waiver requests be provided, including under E-FOIA Amendment and the Board's commitments when enacting Regulation Y, see above].

Via this letter to the Board (and the attached letters to the Reserve Banks), ICP is formally requesting (1) that the FRB and its Reserve Banks take steps to begin providing public notice of requests for waivers (12 CFR 225(d)(2)(v) refers to these as "notices") as soon as possible after they are filed -- before they have been granted, affirmative or "automatically," per Deputy Secretary Frierson's September 12 letter -- to allow the interested public to comment thereon; and (2) that in the interim, the FRS provide ICP with timely notice of all such waiver requests that are filed, and when asked, with the documents comprising the waiver request(s), again before they have been approved, affirmative or "automatically."

For the record, request (1) supra is made under the provisions of the E-FOIA Amendments regarding the making available, in electronic format, of frequently-requested and/or produced-on-schedule records. Request (2) is made under both the Freedom of Information Act, and under the FRS' commitment, when it adopted the current Regulation Y, that the Reserve Banks would make available, in three days or less, copies of pending requests for regulatory approval. See also, <>, regarding "availab[ility] on an expedited basis from the appropriate Federal Reserve Bank." As best we can make out, numerous Reserve Banks do not place their Weekly Bulletin of pending application (but not, for now, of waiver requests) on their Web site; we are requesting that the Reserve Banks do this as well...

It is widely agreed that the Community Reinvestment Act has played and is playing a positive role in low- and moderate-income communities throughout the United States. As interpreted by the federal Office of Legal Counsel, the CRA is only enforced in connection with requests for regulatory approval to expand. Clearly, waiving the requirement to apply limits the ability to enforce (or comment on) the CRA...   The FRS needs to at least be open to hearing from the interested public in connection with waiver requests -- clearly, the FRS should not play "hide the ball" about the pendency of waiver requests. Whether intentionally or not, this recently happened: regarding JP Morgan Chase's proposal to acquire three banks from Bank One, ICP submitted a FOIA request on September 5, 2003, and comments from September 9, 2003, onwards. ICP's September 15 comment specifically commented on Bank One's proposal to charter and acquire three new banks in connection with the proposal.

ICP has already submitted to the FRB a letter it received from the Federal Reserve Bank of Chicago, dated September 18, 2003, acknowledging receipt of and purporting to respond to ICP's comments "with respect to a proposal by Bank One Corporation, Chicago, Illinois to charter / acquire the stock of three interim banks." The letter states: "At this time, no formal proposal for the aforementioned transaction has been received by the Federal Reserve System."

To be diplomatic, that does not appear to be the case. ICP subsequently received a copy of a "Response by Bank One Corporation to the Allegations Raised by the Inner City Press," which referred to a "Letter, dated September 8, 2003, from Richard K. Kim to Mr. Philip G. Jackson, Federal Reserve Bank of Chicago," which asked "that Bank One not be required to submit an application under the [BHC Act] for approval to form the interim banks."

Frankly, the above-quoted response to ICP by the FRB of Chicago, that "[a]t this time" -- that is, as of September 18 -- "no formal proposal for the aforementioned transaction has been received by the Federal Reserve System" seems to us highly problematic. [Footnote: Since the Board has yet to provide its response to ICP's September 5, 2003, FOIA request, ICP has not yet appealed -- but the September 18 FRB of Chicago statement, quoted above, is interpreted by ICP to be a (controversial / counter-factual) FOIA denial; ICP awaits explanation and an appealable ruling.] Perhaps the phrase "formal proposal" was meant to implicitly exclude requests for waivers from the need to apply. If so, this is a misleading word-game of a type in which the FRS should not engage.

Going forward, notice should be provided: from the date of this letter, directly to ICP (see above), and, as quickly as possible, by a more systematic means, on or similar to the Board's H2A.

    Also last week, Inner City Press obtained via a Freedom of Information Act request summaries of some complaints against Wells Fargo Financial (in the below, the "Company," with addresses including Des Moines, Edina MN, Sioux Falls SD, including:

- "company calls and harasses consumer at work and consumer has asked company to stop calling them at work;"

- "Consumer received payment notices for an account he knows nothing about;"

- "Consumer sent the company a check to pay off their loan and close the account. Company did not close the account;"

- "Consumer co-signed on a vehicle and the company repossessed it without written notice, while consumer was current on payments;"

- "Company tried to convince consumer to take out another loan and she said no. Consumer says the company deposited money in her account anyway;"

- "Consumer took out a loan with the company and used her vehicle as collateral and gave the company the title to her vehicle. Consumer has paid off the loan but the company is given her the runaround on returning her title;" etc..

   What's striking in all this is how the predatory problems at Wells Fargo go well beyond mortgages... Also on October 6, along with many community and consumers' groups, ICP commented to the OCC opposing its proposal to mass-preempt state consumer protection laws. We'll see... 

September 29, 2003

   While public comments on preemption of anti-predatory lending laws accumulate at the Office of the Comptroller of the Currency, on the pending application by the nation's second largest bank to shield its 302 subprime mortgage lending offices from state consumer protection laws, the OCC's sibling the Office of Thrift Supervision has so far refused to extend the comment period, despite the list of Chase's offices having been incomplete and inaccurate throughout the comment period. Inner City Press / Fair Financial Watch has asked the OTS to hold a nationwide public hearing, as they did on Citigroup - Golden State Bancorp and WaMu-Dime; on those requests, no answer either. ICP has written to numerous states' regulators and attorneys general, and responses have started trickling in. A sampling:

   The State of Washington Department of Financial Institutions' legal counsel, Joe Vincent, explains his understanding that Chase Manhattan Mortgage Corp. (CMMC) is a subsidiary of Chase Manhattan Bank USA N.A. (actually, it isn't) -- and then says, "I wish to express on behalf of our Director, Helen Howell, appreciation for your concerns... It is not, however, within the purview of the DFI to speculate on or officially comment on the application of CMMC to become a federal savings bank, a matter solely within the jurisdiction of the OTS and FDIC." We disagree -- state officials can and should officially comment, when the consumer protection laws they administer are being preempted -- but appreciate the detail of the response. Close readers may remember that Helen Howell similar prevaricated with regard to Wells Fargo -- not opposing, but asking the Federal Reserve to look into it. (For more on the Fed, click here)

   The Georgia Department of Banking and Finance lists a volume of complaints against CMMC significantly higher than for its peers, including, frankly, Wells Fargo. The Kansas Bank Commissioner's Office offers to tell ICP the number of complaints, while withholding the specifics. We've pointed out that the Kansas Insurance Department gave us detailed complaint information, regarding Household / HSBC; we'll see. An ongoing problem in search of a solution: the Pennsylvania Department of Banking, relying on an archaic statute that restricts requests under the PA Right to Know Law to state residents, refused to provide any information. This is a legal nut (and we mean nuts, crazy, insanely unaccountable) that we aim to crack, and soon.

September 22, 2003

    When the second-largest bank in the United States seeks to sneak its subprime lending into a federal savings bank and evade all state laws, it's a big deal -- at least, we think so. And so our focus remains J.P. Morgan Chase's stealth proposal to shift its subprime auto, credit card and mortgage lending (though 302 offices of Chase Manhattan Mortgage Corp.) into "Chase FSB." On September 18, ICP/Fair Finance Watch wrote to dozens of state attorneys general and banking regulators, most of whom have spoken against preemption, and asked them for all documents about, and to take action on, Chase Manhattan Mortgage Corporation. Meanwhile, ICP noticed that Chase's list of CMMC offices that would become branches of Chase FSB was incomplete. ICP asked the Office of Thrift Supervision about this, by telephone, e-mail, then in writing, submitting (late on September 19) the following supplemental comment:

...ICP requested a copy of this application on August 24, received its copy on September 8 and submitted a comment that day. On September 11, having had three days to review Chase application, ICP noticed and asked OTS FOIA staff about an inaccuracy in the application, one the goes directly to the preemption of anti-predatory lending laws which ICP has raised.

Specifically, Exhibit 2 to Chase's Application to the OTS, purporting to be a complete list of the Chase Manhattan Mortgage Corp. ("CMMC") offices which would, under the proposal, become branches of a Chase FSB, was incomplete. As filed with the OTS by Chase, and as received by ICP on September 8, the top listing on the first page of Exhibit 2 was 1875 Century Park East, Los Angeles. Since the list is alphabetical, this would imply that no offices in any state beginning with "A," and none in California communities beginning with any letter before "L," are proposed to become branches of Chase FSB, exempt from state consumer protection laws.

ICP telephoned and then e-mailed OTS FOIA staff about this on September 11, asking if a first page of Exhibit 2 was omitted. Four days later on September 15, the OTS faxed ICP with a new list -- new in the sense that the CMMC office at 1875 Century Park East, Los Angeles is not at the top of any page -- rather, it's the third branch down on the second page. ICP infers that Chase filed with the OTS an inaccurate Exhibit 2, and that after ICP inquired, a new -- at a minimum, newly formatted -- list was submitted, including 29 CMMC offices that were not mentioned in what Chase first filed (and what was of public record throughout the OTS' comment period). ICP asked OTS FOIA and OTS-NE staff members about this in a September 11 e-mail, to which it has not received a response. That the incomplete list that ICP received on September 8 was due to Chase's inaccurate submission is reflected by a copy of the Application ICP has now received from the FDIC, still velobound, with the same problem with Exhibit 2.

Among the CMMC offices omitted from the application as Chase filed it are multiple offices in AR, AZ and CA. In Little Rock, Arkansas (where Chase's application omitted its office at 11300 North Rodney Parhan Road), CMMC in 2002, for conventional home purchase loans, denied loan applications from African Americans 3.06 times more frequently than applications from whites.

In Tucson, Arizona (where Chase's application omitted its office at 5151 East Broadway Boulevard), CMMC in 2002, for conventional home purchase loans, denied loan applications from Latinos 3.64 times more frequently than applications from whites.

And (for now), in the San Francisco MSA (where Chase's application omitted its office at 2001 Junipero Serra Boulevard, Daly City -- close to home, so to speak, for the OTS and the Western Regional Office) CMMC in 2002, for conventional home purchase loans, denied loan applications from African Americans 4.48 times more frequently than applications from whites. If Chase's defense for this high denial rate disparity is the low level of its lending to African Americans, that raises other issues -- note also for refinance loans (at a greater volume), CMMC denied loan applications from African Americans 3.06 times more frequently than applications from whites. Chase's disparities are systemic.

Given the significant policy issues raised by the proposed exemption from state law of CMMC lending, including subprime lending, offices, the omission of 29 offices from what was available to the public militates for new public notice, and for an extension / re-beginning of the comment period from the date at which the actual list of offices proposed for preemption is made fully available to the public.

...We reiterate, including in light of the significant incompleteness and/or inaccuracy of the application which Chase filed, our request that the OTS' comment period be formally extended, that ICP's hearing request be deemed timely and that the requested informal or formal meeting be scheduled forthwith. The meeting should be nationwide, by video-conference (as was done on Citi-Golden State, and WaMu-Dime before that)...

Morgan Chase has yet to submit any response to the issues raised in ICP's September 8-9 submission; when Morgan Chase does, ICP will reply. For now, we further note, on the Poconos issues, the Chicago Tribune of September 14, 2003, following up on the Poconos "scandal [which] has also produced a federal class-action suit... [Chase] is also a defendant in the racketeering suit;" it has been reported that the Monroe County District Attorney's office plans to file criminal charges this coming week against as-yet unspecified defendants, in connection with the same scandal. As relates to applicable banking law, Chase's standards, of appraisal and whom it does (subprime) business with, are entirely called into question, militating for the evidentiary hearing ICP has timely requested.

   Meanwhile, following outreach, battle has been joined by groups coast-to-coast. In the day following ICP's submission to state AGs and bank regulators, responses were received from regulators in Arizona and California. As these build up, we'll report the substance (or absence) of the various states' responses.

   Then there's this, from one of ICP's favorite bank watcher, based in the U.K., comes this news report, headed "HSBC may expand Household into India," 9/19:

HSBC Holdings Plc the world's second-biggest bank by market value, said on Friday it may expand its Household International consumer finance business into Japan, India and Russia. "There is a very strong consumer finance market in Japan. You would have to look at large economies such as India and large emerging economies such as Russia," Household Chief Operating Officer Dave Schoenholz, told reporters at HSBC's London offices... The bank will target countries with growing affluent populations that want credit for goods such as furniture, HSBC Finance Director Douglas Flint said.

   All we can say is "ouch" -- Dave Schoenholz is a notorious loan shark / bookkeeper; the previously cocky Doug Flint is now scheming about hard-lending on furniture.

   Here's how Citigroup does it, via a sample CitiFinancial manhandling of a customer, raised to ICP last week: the customer began with a personal loan of $2700 -- quickly, CitiFinancial suggested this be converted into a mortgage, and other debts rolled in. This was done a month after the unsecured loan; pay-offs were issued to Household Finance and others, but not Union Planters Bank, which held a $6000 home equity line of credit (HELOC) on the customer's home. CitiFinancial charged five "discount" points, as well as for an appraisal done by CitiFinancial's affiliate, Chesapeake. But that double-dipping was only the beginning: the next thing the customer knew, he'd been issued two additional loans, neither of which he ever signed for. These came a week after the mortgage, and the amounts added up exactly to the HELOC that was owed to Union Planters Bank. It's become clear: CitiFinancial made a mistake in not paying off the U.P. HELOC -- it left CitiFinancial in a secondary lien position, although its loan was larger. So, without the customers consent, CitiFinancial issued (fraudulent) additional loans, at high rates. Now Citi is trying to collect on these phantom loans. This -- is the house of cards, the foundation of sand, underlying this crucial industry of finance...

September 15, 2003

   After deadline for last Monday's CRA Report, Inner City Press learned that J.P. Morgan Chase is attempting to place its nationwide consumer lending, which includes a top-ten subprime lending operation, into a new federal savings bank, in order to preempt (and evade) all state anti-predatory lending laws. ICP learned this not from Chase (which opposed ICP's request for a copy of the application and an extension of the comment period), but rather in a Freedom of Information Act response from the Office of Thrift Supervision, received on September 8. 

   ICP immediately commented to the OTS (a staffer of which has confirmed that ICP's comments will be considered, and that Chase has been asked to respond to them), and re-requested the complete list of the offices of Chase Manhattan Mortgage Corporation (CMMC) which, under the proposal, would become branches of a federal savings bank, not subject to state or local anti-predatory lending laws.  On September 15, ICP received the (apparently revised) list.  The offices are in 32 states, as follows:

Alabama 1; Arkansas 3; Arizona 9; California 54; Colorado 10; Delaware 3; Florida 34; Georgia 12; Illinois 18; Indiana 5; Kansas 3; Louisiana 11; Massachusetts 8; Maryland 11; Michigan 11; Minnesota 6; Missouri 8; North Carolina 11; New Hampshire 2; Nevada 2; Ohio 9; Oklahoma 4; Oregon 12; Pennsylvania 7; Rhode Island 1; South Carolina 3; Tennessee 3; Texas 14; Utah 2; Virginia 12; Washington 10; Wisconsin 3

   Two reporters, to our knowledge, asked Morgan Chase last week about its stealth proposal to preempt all state laws with its consumer lending. The first, well versed in Chase's ways, asked to speak with Donald Layton in the Office of the Chairman, or, as a fall-back, to Hal Pote. Neither was made available, only a canned statement that "[t]he FSB charter is widely used by financial institutions. Under that charter, they operate federally regulated businesses under a single national standard." After this code-word for preemption, the (American Banker) article went on to quote Chase that it's also about being how "our customers see us, as a single financial services provider." ICP's then quoted that "it's purely a legal move to preempt state laws," a position we stand behind, one that we've seen nothing to contradict.

   The second reporter -- ah, why not name them? The first was Liz Moyer, and this one's Reuters' Chris Sanders -- elicited from Chase's spokeswoman a more ideological statement, that "[a] patchwork of local and state regulation does not best serve the interests of consumers or the industry and can only result in reducing the availability of credit and increasing its cost." ICP's then quoted that Chase would use the new thrift to help evade increasingly tough predatory, or subprime, lending laws in about 40 cities and states.  Actually, it's 32 states, and many more cities.   Developing...

   And here's something that has developed: a quiet Citigroup / CitiFinancial announcement, which for now we'll simply quote. Citi's response to the Office of the Comptroller of the Currency, which archly states that "one commenter discusses allegations in connection with a pending case in Tennessee," also slips in that "Effective July 1, 2003, CitiFinancial ceased offering optional personal property insurance in connection with its secured loans." Well, now. ICP Fair Finance Watch documented this practice to the Federal Reserve Board, and asked Sandy Weill about it at the company's April 2002 annual meeting; the Wall Street Journal finally got and reported Citigroup's answer (see, "Efforts by Citigroup to Reform Subprime Unit Raise Questions," Wall Street Journal, July 19, 2002)

When it makes a personal loan, CitiFinancial often asks the holders of personal loans to provide collateral. In some cases, according to CitiFinancial documents filed by Inner City Press, that collateral includes fishing lures and tackle boxes, record albums, tents, sleeping bags and lanterns -- items that CitiFinancial would almost certainly never bother to collect in the event of a borrower's default. Yet insurance is sold on the collateral in case it is damaged or lost.
"It's predatory: This insurance product has no rationale, because it's not credible that someone would want to have their loan paid with their leaf-blower," said [ICP]...
Citigroup officials concede seizing such collateral would be more hassle than it's worth. But they say providing such collateral on loans has a purpose -- "to make the borrower more responsible for paying the loan back," says Ajay Banga, Citigroup's business head of consumer lending.

    Citi's response was bogus at the time, and now fourteen months late, Citigroup says quietly that the product has been eliminated. We'll see -- and ask, whether any of these commitments apply to CitiFinancial's growing business outside the United States...

September 8, 2003  (Sept. 9 update: ICP has just challenged two Chase applications)

    A month ago -- August 4, to be precise -- a proposal was announced under which a New York-based insurance company owned by General Electric, Financial Guaranty Ins. Co. (FGIC), would be acquired by a team lead by the PMI Group, described as a mortgage insurer. But PMI has been under fire for months for its ownership of the troubled Fairbanks Capital Corp., widely accused of being a predatory mortgage servicer. While Fairbanks has recently being trying to make peace with some, consumers continue to be injured. And yet, PMI proposes to spend over $600 million to acquire 42% of FGIC, and get it more deeply involved in securitizations of subprime loans. ICP's Fair Finance Watch on September 8 submitted opposition to the proposal. See also, "Consumer Group Opposes GE Financial Operations Sale to PMI," Stamford Advocate, September 9, 2003;  "PMI Deal Draws Criticism," by Erick Bergquist, American Banker, September 9, 2003, Pg. 14;  "Consumer Group Opposes GE Fincl Guaranty Ops Sale To PMI," by Beth Demain Reigber, Dow Jones Newswires, September 8, 2003; "ICP Questions Sale of GE's Financial Guaranty to PMI," by David Weidner, CBS Market Watch, September 8, 2003.

    Beyond putting into the record information about Fairbanks' predatory servicing, ICP tracked PMI's dodging of the issue, first by quoting from transcript of the PMI Group Conference Call To Discuss [the proposed] Acquisition of FGIC. An analyst asked about Fairbanks, but his question in this regard was not answered; then another analyst asked more directly about PMI's investment in the embattled Fairbanks, and its relation to this proposal. PMI's proposed manager of FGIC, Frank Binova, dodged the question by stating, "Let me just address the question on Fairbanks. We gave a full update of the situation at Fairbanks in our earnings call last week and that is really all of the information we have to disclose right now, I believe that information is still current and appropriate."

   So we turn to the transcript of PMI Group's 2nd Quarter 2003 Earnings Conference Call. PMI's CFO Don Lofe stated that

"[f]or the second quarter, our equity portion of the earnings in Fairbanks was a loss of $400,000. Fairbanks loss for the quarter was largely a result of a restructuring and litigation settlement charges. While there have been some positive developments at Fairbanks, particularly the establishment of a new credit facility, future operating results remain uncertain due to the pending [HUD-FTC]investigation, private litigation and other expenses Fairbanks may incur as it retools its operation. For that reason, we remain unable to forecast what impact future developments at Fairbanks could have on PMI's earnings for the balance of the year."

   Following PMI's Mr. Lofe's above-quoted statement, yet another analyst asked, "your comments on Fairbanks -- fair enough, you're not able to forecast. But were the restructuring charges and litigation settlements onetime events in the quarter or are we likely to see more of that?" PMI Group's Mr. Corso answered "No comment." Given the statutory factors the NYSID must consider, that answer is not sufficient. We've submitted a Freedom of Information request, and a request for a hearing; developing.

   Meanwhile, in other regulatory evasion news, General Electric's savings bank, GE Capital Consumer Card Co., has been fighting to keep its designation as a "limited purpose" institution, despite acquiring (subprime) mortgage lending capacity. Last week in response to a FOIA request, the Office of Thrift Supervision provided ICP with a portion of GE's August 1 application to create a new "operating subsidiary" of its savings bank, to be called GE Home Finance Inc. This way, the mortgage lending could be moved out of the savings bank to an affiliate, and, GE argues, the savings bank could still be "limited purpose" (leading to much more limited Community Reinvestment Act scrutiny). But wait -- if this convoluted evasion is allowed, couldn't every saving bank, including WaMu and others, do the same? The OTS waiting until more than a month after GE had applied to provide any portion of the application to ICP -- since the OTS generally rules on op-sub applications within a month, scrutiny may again have been evaded in this instance... Stepping back to view the whole forest of General Electric: perhaps, if it acquires Universal (as was proposed last week), GE will opened up a predatory lending theme park... Perhaps as an operating subsidiary...

   In political news, a search of recent federal campaign contributions for "Prince, Charles" (Citigroup's incoming CEO) reveals four contributions: two to "Shelby for U.S. Senate," and then the classic gift-split: $2000 to Bush-Cheney 04 Inc., and $2000 to John Kerry for President, Inc.... For the top two at AIG, a search for "Maurice Greenberg" reveals seven contributions: Missourians for Kit Bond (2), Chris Dodd, Carper for Senate, Bush-Cheney, Judd Gregg and Mark Foley. A search for AIG general counsel Ernest Patrikis reveals five contributions: Missourians for Kit Bond, Chris Dodd, Carper for Senate, Republican National Committee and "Team Sununu"...

  Finally, for now, this New York Community Bancorp - Roslyn update [see ICP's Bank Beat].  Until next time, for or with more information, contact us

September 1, 2003

   We focus this week on regulatory loopholes which are allowing under-performing institutions, predatory lenders and redliners, to proceed and expand without scrutiny or public oversight. Take the Federal Reserve, for example: when bank holding companies propose to merge, the Fed is supposed to require an application, publish notice of the application, accept comments and consider them, including under the CRA. But it finds ways to avoid doing this, its job. For example when HSBC bought the notorious predatory lender Household International, the Fed first considered giving HSBC a waiver, then schooled HSBC is how to avoid having to apply (the rushed sell-off of Household's savings bank). Now, we've found that on the biggest bank merger proposal year-to-date in New York City, the Fed is also trying to grant a waiver. In late June, New York Community Bancorp announced a $1.69 billion proposal to acquire Roslyn Bancorp. Roslyn had previously settled predatory lending-related charges; issues have been raised more recently about NYCB. Still, the Fed apparently took under advisement a waiver request, without providing public notice. Thankfully, the New York Banking Department did provide notice, and accept comments; ICP has just submitted opposition, stating among other things that

In 2002 in the New York City Metropolitan Statistical Area ("MSA"), for conventional home purchase loans, NYCB made 53 loans to whites, six to Latinos, and only three to African Americans. For these three groups, the aggregate made 13.87% of its loans to African Americans, and 13.47% to Latinos. For NYCB, the figures were much lower: only 4.8% of loans to African Americans, and only 9.7% to Latinos.

For refinance loans in the NYC MSA in 2002, NYCB was even more disparate: NYCB made 101 such loans to whites, only six to Latinos, and only seven to African Americans. Among these three groups, only 6.1% of NYCB's refinance loans were to African Americans (versus 17.42% for the aggregate); only 5.3% of NYCB's loans were to Latinos (versus 9.9% for the aggregate).

Looking county by county, NYCB's record is even more troubling. NYCB has six branches, for example, in Kings County (Brooklyn); in 2002 it made only one mortgage loans to an African American in Brooklyn, and none to Latinos. In The Bronx, it made only one mortgage loan to an African American, and only one to a Latino. While NYCB might attempt to explain these disparities by claiming to be primarily a multi-family lender, the 2002 data reflect that, for example, NYCB made over sixty one-to-four family mortgage loans in Nassau County, and over 80 one-to-four family mortgage loans in Suffolk County. It is not legitimately, under the fair lending laws, the CRA and otherwise, for NYCB to provide homeownership lending only in more affluent, less diverse suburbs, but to essentially refuse to provide such homeownership financing in lower income, more diverse urban counties like The Bronx and Brooklyn (and to provide only renter-related financing in such counties).

Nor can NYCB's defense (and answer to the question, "where do the deposits collected in lower-income NYC go?") relate to it small business lending. ICP has reviewed NYCB's 2002 CRA data, and finds for example that NYCB made only one small business loan in Brooklyn (where it has six branches), while it made five small business loans in Manhattan -- four of these loans were in census tracts whose median income was over 120% of area median.

NYCB is also disparate in its two other states, New Jersey and Connecticut. In the Newark NJ MSA in 2002, NYCB did not make a single reported mortgage loans to an African American or Latino (while making loans to whites and "Race Not Available"); the same is true in the Bridgeport and New Haven MSAs in Connecticut.

   NYCB does business in more than one state, and the Fed is the main federal regulator. We've asked the Fed to deny or rescind the waiver; developing.

  In insurance regulation, things may be even worse. On August 18, within the comment period of the Pennsylvania Insurance Department on AIG's proposal to acquire four Pennsylvania-domiciled insurers owned by GE, ICP submitted detailed comments about AIG's insurance sales practices, and, separately, about GE's practices. On August 25, the Pennsylvania Insurance Department faxed ICP a "response" by AIG, to which ICP on August 26 replied thus:

ICP's contention, which is also documented by the Insurance Product Guide which ICP submitted into the record, is that the employees of AIG American General are being trained to hard-sell credit insurance, to convince individuals who say they don't want and/or can't afford the product to nevertheless accept it. To that we can add that employees of AIG American General are told, under the heading "Why Sell Insurance?" that "[e]ach AGF branch benefits from the sale of insurance through increased profitability. Typically, forty percent (40%) of net written premiums are reflected on the PLR." ICP contends that this high percentage, and the way that AIG compensates and "incents" AIG American General employees, is virtually a "worst practice," and harms consumers... AIG's second response states vaguely that "in certain circumstances, American General Finance ('AGF') does foreclose on personal property collateral after customer default." But an obvious question is: does AIG American General only offer (that is, hard-sell) personal property insurance on property regarding which it would and does file a UCC-1, and would foreclose? The Department should ask the question, and AIG should answer.

AIG's final point is entirely evasive. ICP directed the Department to a recent news account of the administration placing Zimbabwe on a sanctions / blacklist based on human rights concerns. ICP then asserted -- and AIG does not deny -- that AIG continues to do business in Zimbabwe. Our question is not only "how is that legal and/or moral," but also how it is consistent (or not) with the integrity and other factors which the Department must consider under the Insurance Holding Company Systems statute.

AIG's August 21 letter states that its "General Counsel has previously offered to meet with [ICP] to discuss [its] concerns with AIG's business -- which offer has remained open since 2001 -- yet [ICP] has refused to take AIG up on this offer."

AIG's reference is apparently to a telephone conversation on August 8, 2001, returning a call from AIG's general counsel. Immediately after the brief conversation, AIG's general counsel wrote to the New York Banking Department, urging that Department to approve American General-related applications which ICP had opposed, including based on the telephone call. ICP inferred that the only purpose of AIG's general counsel's call was to immediately characterize it to regulators as somehow militating for approval of AIG's acquisition proposal.

[Note that AIG's general counsel used to be... the general counsel of the Federal Reserve Bank of New York, Mr. Ernie Patrikis. His behavior since leaving the Fed can, in a sense, be said to reflect the feelings of at least some at the Fed... ]

  Then the Pennsylvania Insurance Department said that on August 26 -- a week after the expiration of the comment period, and one day after it faxed ICP a copy of AIG's "response," the Department approved the transaction. The Order includes:

17 During the Comment Period, the Department received one comment from an interested person who opposed approval of the application on the basis of alleged improprieties by AIG.

18. AIG responded to the comment.

19. The Department fully considered the comment and AIG's' [sic] response.

On August 29 AIG announced that it was "consummated." And yet -- the issues will be pursued..

    Finally, we received on August 29 Citigroup's much-delayed response to our comments of August 4, on Citi-Sears. Citi's response tries to argue that the predatory lending issues raised are "not related to the parties or the transaction." Meanwhile Citi reiterates that it would expand marketing of "insurance as well as consumer finance products and services" to Sears' customers.

  Citi also states that it "does not provide public comments on matters that are the subject of litigation." Fine, then -- the OCC should simply deny Citi's applications until Citi is prepared to respond on relevant matters timely raised. Here's another, pre-litigation:

Subj: CitiMortgage has lost my wire

Date: 8/26/03 2:28:15 PM Eastern Daylight Time

From: [Name withheld in this format]

To: feedback [at]

I found your web site and am in horror of what CitiMortgage has been up to. On 8-5-03, Equity Title Company wired a loan payoff to CitiMortgage. CitiMortgage has still not applied the $ to my account, which is 21 days later. I have faxed them the copy of the wire confirmation, I've sent faxes, I've called numerous times, and no one will return my call or help me. I recently had applied for a home equity line after this loan was supposedly "paid off" and will not get this loan now. I have never been through an experience such as this and I'm beyond frustration. How can a company like this stay in business?!

   It's called... campaign contributions!  As to the business that Citi does through third parties, subprime and otherwise, Citi responds that it "review[s] resumes of principles of all third-party originators" (Resp. at 11). Rather than explain its basis for continuing to do business with the questionable subprime lenders ICP has named, Citi responds with generalities such as this. Somehow we doubt that a resume or c.v. would be the best source for potentially adverse information...

   Until next time, for or with more information, contact us

   [Archival material has been shorted to conserve server space; contact ICP if any questions.]

Medley of earlier in 2003:

August 25, 2003

   Some weeks ago, we reported that the Federal Reserve Board's outreach about the proposed new Basel Capital Accord excluded community and consumer groups. Well, for that reason ICP commented on the Accord, directly to the Basel Committee on Bank Supervision. Many large U.S.-based banks commented as well, as did regulators from all over the world. ICP's comments emphasized that predatory lending and others lack of standards should be included in any assessment of capital; they also touched on the Fed's refusal to consider U.S.-based holding companies' actions overseas, despite the fact that many countries defer, even on events in their countries, to banks' home-country supervisors. Click here to view ICP's comments (in PDF format). The loophole can't be denied; it would be surprising if the Fed took no steps to close it -- including beginning to inquire into U.S.-based lenders' predatory lending beyond the U.S.....

   Meanwhile, the Predators' Ball: slated from Las Vegas, November 13-14, is a virtual how-to conference for predatory lenders: one workshop is entitled "Challenging Predatory Lending Laws." yes, you could learn how to do predatory lending, from Wells Fargo, Ameriquest, New Century Financial, and others -- for only $1,699! We are not seriously promoting this (surprising, right?), so no further information will be given here. But those are the real dates, costs, and "teachers"...

  On Wells, we've noticed yet another way in which Wells' "Island Finance" has even weaker compliance programs than Wells Fargo Financial. In response to a Fed question for subprime lending volume data by product, Wells Fargo has stated that "[b]ecause Island does not track volume along product lines these numbers are not broken down in that fashion." This statement is not made for Wells Fargo Financial...  [Click here for more of ICP on Wells.]

July 28, 2003

   Our focus this past week has been Wells Fargo, particularly its non-U.S. / overseas predatory lending. The trigger is Wells' pending proposals to acquire banks in Washington State and in Colorado. The issues go beyond these two states -- beyond the United States, in fact.

   ICP ran into Wells Fargo's "Spanish-speaking" subprime lender Island Finance in 1997, when an Island Finance branch opened in the South Bronx, charging 25% interest to all customers, even if they have pristine credit histories. ICP documented and raised these issues in 2000 (see, e.g., "N.Y. Activists Seek Nevada Hearing," Las Vegas Sun, Oct. 24, 2000, and "Consumer Advocates Want Hearings on Wells Fargo Deal," Associated Press, April 18-19, 2000 (Alaska). But the Fed at that time tried to evade its duties to consider the full lending profile of the bank holding companies it regulates. This is contrary to current international law, and even "customary" law (a term of art in the human rights field). Take, for example, a response ICP / Fair Finance Watch received last week from regulators in Sweden, whom ICP/FFW asked to act on HSBC's export of Household International's lending practices:

In a message dated 7/24/03 8:24:15 AM Eastern Daylight Time, [ ] writes:

Thank you for your letter concerning Predatory Lender Household International. You mention in your letter that HSBC already runs the Household´s business model in Sweden in HSBC Bank plc at Västra Trädgårdsgatan 17, Box 7615, 103 94 Stockholm.

Financial Services Authority, (FSA), Lomdon, has notified Finansinspektionen that HSBC Bank plc - a firm authorised by the Financial Services Authority - has informed FSA to carry out activities in Sweden by its branch in Stockholm...

The branch in Sweden is under supervision of the home country, FSA, with exemption for liquidity, which is supervised by Finansinspektionen. According to The Banking Business Act the branch is allowed to carry on the same business in the host country as is allowed in the home country. Finansinspektionen has no detailed knowledge about which type of lending, that is carried out in Sweden, why Finansinspektionen therefore cannot verify that the Household´s business model is run by HSBC Bank plc branch in Stockholm. That means that if you have any points of view of the business run by the branch in Sweden, please contact the FSA in London, as the FSA has the homeland-supervision of that business. --Jurist/Legal Counselor, Finansinspektionen

  The relevance to Wells Fargo and the Fed: under this model of bank regulation, the Federal Reserve as Wells Fargo's home county regulator must consider Wells Fargo's lending, including high-cost subprime lending, in other host countries.  [Click here for more of ICP on Wells.]

June 30, 2003

  We focus this week on the insurance industry. Not only in light of the proposal announced on June 26, for AIG to buy subsidiaries of General Electric in the U.S. and Japan for over $2 billion, but also to report on the place of consumers' and community groups -- said otherwise, civil society -- at the recent shindig of the National Association of Insurance Commissioners, held in New York on June 21-24.

  It was held at the New York Hilton on Sixth Avenue; it cost six hundred dollars. Inner City Press attended, but did not pay. Rather, an ICP representative made a presentation on June 21 to the NAIC / Consumer Liaison committee. The insurance commissioners of a dozen states were there; some got a bit testy when it was pointed out how difficult they've made it for consumer groups to participate in the proceedings they're required to have when one insurer applies to buy another. ICP's remarks are available here; what we'll do there is report on the commissioners' response. Mike Kreidler, the Washington State commissioner, responded that his office and state had done much to combat Household's predatory lending and credit insurance. Most vituperative, the general counsel of the New York State Insurance Department rushed into the room to deny that the NYSID discourages comments from the public. But ICP has letters from the NYSID, dated January 8, 22 and 29, 2003, each of which claims that the existence of pending merge applications is confidential. How then could the public know when to comment? We will be following up on this.

ICP also attended a meeting of NAIC's International Insurance Relations committee. The chair of the committee, District of Columbia insurance commissioner Larry Mirel, repeated invited "the industry" to make suggestions, and to participate in the Working Group's conference calls. ICP intervened, saying it's important that not only the industry, but also consumer organizations -- that is, civil society -- be allowed to participate. "But of course," the chair responded, promising that ICP will be informed of upcoming proceedings of the committee. We'll see. Meanwhile, the representative of the insurance company AIG participates extensively in the committee; AIG and its peers appear to dominate the NAIC...

June 9, 2003

   This week: two takes at talk-is-cheap. The incongruity between banks' "sensitivity" to environmental and predatory lending issues is notable, particularly at Citigroup and Royal Bank of Scotland. On June 4, Citigroup and nine other global banks announced reforms to their project finance lending, adopting a vague set of "Equator Principles" -- the World Bank offered praise; environmental organizations put forth a mix of praise and critique. Citigroup's Chuck Prince said-in-statement that the Principles are "a major step forward by the financial sector to address the environmental and social issues that arise from development projects."

   We can't help noting that this is the same Citigroup (and the same Prince) long refusing to adopt any standards regarding which high interest rate loans they buy, securitize or otherwise enable. When the issue was raised, Mr. Prince said that Citi was akin to a pipe or a wire, through which the loans flowed. Strange, then, that Citi would so loudly claim to be considering the environmental impact of its project finance loans. It's a selective sensitivity, determined by bad press (on Citi's predatory lending, see Mike Hudson's excellent exposé, online here in pdf format). Also strange is the inclusion of Royal Bank of Scotland on the list. They almost didn't sign, then did. But they deny any responsibility over the social effects of loans RBS' Greenwich Capital Markets makes to questionable subprime consumer finance lenders. The Federal Reserve has given RBS (well, RBS' Citizen Bank's Larry Fish) until June 13 to respond to the issues ICP raised on June 2. RBS no-commented to the London Guardian of June 3, "Royal Bank of Scotland would not comment yesterday." But RBS' Citizen got one of its "community partners" to speak for it, in the Boston Herald of June 3. It's a shame...

   ...Fairbanks last week informed consumer attorneys that the Skadden Arps law firm, "effective immediately," no longer represents it, and that all communications should henceforth be directed to Fairbank's inside general counsel Greg Harmer in Salt Lake City. Strange... unless it's related to the simultaneous unsourced report that Fairbanks was buying Hogan & Hartson's Christine Varney, former head of the FTC, to represent it with the FTC... We also note that, when CitiFinancial victims seeking to opt out of the Morales settlement contacted Skadden Arps, they were told that "the client" (Citigroup) was not willing to allow anyone who they deemed to have opt-out too late to get out of the case. Some settlement...

May 26, 2003

   This week: more late-released documents from the Office of the Comptroller of the Currency, this time about U.S. Bancorp - Bay View...  The Freedom of Information Act appeal responses keep rolling in from the Office of the Comptroller of the Currency. Last week we received one hundred-and-some pages responsive to Inner City Press' September 15, 2002, appeal regarding the OCC's handling of U.S. Bank's application to acquire Bay View Bank's 57 branches. On Sept. 11, 2002, Richard Hidy of U.S. Bank wrote to the OCC informing them that "Bayview received Proxy approval last night, so they will start calling their DC examiner for prompt OCC approval." This is followed by a Sept. 12 internal OCC e-mail, "Can you give me an idea of when the approval," etc; a Sept. 16 OCC e-mail referring to ICP's "complaint letter," stating that U.S. Bank "is obviously very interested in the approval since it determines when (or if) the bank will be able to close on this transaction. They are planning the shareholder vote for October 3, 2002 and would like to close the transaction as soon as possible after the shareholder vote [REDACTION]."

  Then, on Oct. 3, another OCC e-mail: "There are a couple of additional questions that have been raised, that I hope you can answer without too much additional research... The FRB has indicated that US Bank did make about 76 loans in San Francisco, and that those are reported somewhere in the disk that was provided to [ICP]. Based on this information, [REDACTED]."

   The reasons the Federal Reserve Board mailed ICP a disk containing US Bank's 2001 mortgage data is that the data uploaded to the website was incomplete. An e-mail submitted to US Bank to the OCC blames this incompleteness on "the anthrax scare," and goes to great lengths to show US Bank's burning desire to provide this data to ICP (to expedite its application). US Bank states that "we were one of 5% of reporting banks impacted by the anthrax scare in Washington from the 9/11 events of 2001... In order not to delay this process further, our CRA team generated a disk with all of our 2001 HMDA information, and shipped it to our New York counsel... We then instructed our New York counsel to print the contents of the disk (12,000 pages), and deliver the disk, and printed pages, to [ICP]... Also on September 18, we reached Patricia Dykes with the Fed. She agreed to generate a disk that would contain the information in the exact form as on a properly working FFIEC site, and overnight the disk directly to [ICP]." The OCC then wrote up this tale of woe (or judgment), trying to blame the community group commenter (ICP) for the inaccuracy of the publicly available data, for being unable to immediately analyze 12,000 pages of data, or to analyze data in the high-falutin computer program in which the bank provided it. The OCC did, however, extend the comment period to Oct. 2. ICP and others commented; the OCC, however, delivered approval to US Bank on October 10 -- later than the bank had requested, but still calling into question whether the analysis of the missing data, provided on Oct. 2, was even considered. The OCC continues withholding sixty pages of responsive records...

April 28, 2003

   On April 25, Inner City Press / Fair Finance Watch filed comments opposing General Electric's proposal to acquire business, including home improvement lending, from the bankrupt Conseco. GE proposes to make the acquisition through its savings bank, which claims that it only does credit card lending (and is thus treated, for CRA purposes, as a "limited purpose" institution). But with the addition of home improvement lending, it's no longer a limited purpose institution. Where, then, is the new CRA plan? GE has not submitted one. In fact, GE's charter switch from a non-bank bank to a federal thrift was a stealth way to accomplish the blurring of commerce and banking that's so much discussed right now in Congress (with respect to the powers of "industrial loan companies"). Where Wal-Mart wants to be, General Electric already is or is heading, with little to no scrutiny. It appears that GE was hoping that no one would notice or comment on its application. To the contrary, ICP / FFW has started a new GE Watch, click here to view.

March 31, 2003

   As in a rigged game of cards, last week the regulatory approvals for HSBC - Household all fell in a row, days before closing. On March 25, the Ohio Department of Insurance approved. The next day, Delaware Insurance and the New York Banking Department. Then Thursday, March 27, the OCC approved. Four months had elapsed; questions had been asked. Then, as per usual, it was regulatory capitulation.

   On Thursday, March 27, ICP filed a lawsuit against the Ohio Department of Insurance's approval. With only two days to prepare it, it was a mere eight pages long (plus detailed exhibits). But the court was not able to hear the case in time. On March 28, the companies' shareholders met. Sir John Bond held forth in a Canary Wharf conference room. He tried to play Mr. Nice Guy, but when a shareholder ask that the votes be counted and not estimated, he demanded to know how many shares she represented. He also repeated his previous, inaccurate claim that 63% of Household's business is "prime." He procured his vote (numerous HSBC directors hadn't even bothered to show up), and, because courts are not prepared to hear lawsuits the morning after they're filed -- all that was possible in this case -- at 5:02 p.m., the ignoble merger with Household was consummated.

   But the joke, we predict, will be on HSBC. The Hong Kong Shanghai Banking Corporation has bought a notorious predatory lender, which restated its income in August 2002, settled charges of false and misleading statements on March 19, 2003, and is cooperating with an ongoing investigation by the SEC. Meanwhile, ICP on March 28 received from the Maryland regulators a large box of complaints against Household (great timing, no?), and an interesting Freedom of Information ruling regarding the improper withholding of Household-related information, on which we'll be reporting in due course. ICP has begun petitioning regulators in the various countries to which HSBC has said it will "export Household's business model."

March 17, 2003

   Ah, Washington: city of Starbucks and security checks; city of buck-passing where agencies seek legalistic grounds to shirk the duties of consumer protection. From a foray last week, we offer these scenes:

   Scene #1: Fade in, holding pen in the lobby of the Federal Reserve's Martin Building, 20th and C Street. Upstairs the Fed's Consumer Advisory Council is meeting. By the metal detectors, name-tags await the pre-registered guests. These include the lobbying for the subprime lender Option One, and Stacie McGinn of the Skadden Arps law firm, which represented Citigroup against charges of predatory lending. A quarter of an hour into the meeting, a Fed staffer named Ms. Featherstone escorts the observers to the Terrace Level meeting room. The CAC members are in a wide circle, with three of the Fed Governors: Gramlich, Bies and Bernanke.

   Full disclosure and the reason for this insane amount of detail: three days previous, Inner City Press submitted a letter for distribution and action at this meeting. The letter asks the CAC to direct the Governors to make HSBC explain why it's appropriate to acquire the scandal-plagued subprime lender Household International, and put Household's CEO in charge of HSBC's bank. The letter has been photocopied; there's a stack of copies on the table by the entranceway. But it does not come up during the hour-long discussion of predatory lending. There are sharp comments by a consumer attorney from East St. Louis; there are questions from Gov. Bies about state enforcement actions on brokers. The Fed's own duties are not discussed. The issue, it seemed, was addressed in a non-open meeting on March 12. Fed staffer Dolores Smith has assured CAC members that the Fed will, on HSBC - Household, do what it did on Citigroup - Associates. And what was that? Allow the deal to be consummated, and then ask questions. That it makes little sense, in a post-Enron (and post-9/11) world, is not brought up. There is a breakfast spread along the side wall, that even the visitors access. With the Federal Reserve, resources are not at issue.

   Jump-cut to Scene #2, a composite: in meetings with various community groups, the chief counsel of the Office of the Comptroller of the Currency -- to which HSBC has applied -- states that there's little that the OCC can or will do, since the application before it is technically about a credit card bank. But this was also true in Citigroup - Associates, and in that case, the OCC at least attended a public hearing on the deal, and the applicant announced at least a few reforms. Neither has happened here -- the difference being, it seems, the 2000 and 2002 elections.

   These are referred to by another Citigroup lawyer, Andrew Sandler, who's calling for federal law to preempt those pesky states and cities on the issue of predatory lending. When asked a question about Citigroup's current practices -- which include arbitrarily-set interest rates, and compensation paid to employees based on how much credit insurance they sell -- Mr. Sandler says he can't speak for his clients. A woman from Fannie Mae says that her agency checks loan pools for fair pricing, but won't say how, or what's done if pricing disparities are found. The mood is for preemption; the large mood's for war. Fade out...

February 17, 2003

   Fiddling while Rome burns: Rep. Ney has "dropped" (in the Washington parlance) his proposed legislation to preempt state and local safeguards against predatory lending. Meanwhile, even some seemingly well-meaning legislators in essence protect one of the worst of the predators: Household International. Contacted by constituents complaining about Household (and about the limitations of the December 2002 settlement), these politicians says they have "conciliation agreements" with Household. Money talks, apparently. ICP has redoubled its efforts, submitting comment to various agencies considering HSBC's applications to acquire and export Household without reforming; ICP's new comments use internal Household documents and even heretofore confidential government documents.   [click here for more on Household - HSBC].

February 3, 2003

    The breaking news is this: on Jan. 31, Georgia legislators negotiated with Standard & Poor's, to amend the Georgia Fair Lending Law to the satisfaction of S&P. It's somehow reminiscent of the way the International Monetary Fund "suggests" social cut-back and structural adjustments to developing countries in Africa, Asia and Latin America. S&P blithely waded into the political field, and Moody's some followed. Fitch, interestingly, stayed out. But we have a suggestion: there needs to be an oversight board for rating agencies, as there is for accountants Because S&P is out of control....

January 5, 2003

  ...On Jan. 4-5, ICP faxed a letter to the NYBB's 14 members about HSBC's proposal to acquire the scandal-plagued subprime lender Household International, which operates in The Bronx from offices at 68 Westchester Square (HFC) and 2027 Williamsbridge Road (Beneficial), and, as set forth below, through brokers. Among other things, we note that while half of the the NYBB is supposed to represent the public, even on paper, the current balance is 8-to-6 in favor of the industry. Nonetheless, we've faxed the industry-representing members as well, just as on Jan. 3 we petitioned the "independent" directors of HSBC. [click here for more on HSBC].

Click here for CRA Reporter Archive 2002

Click here for CRA Reporter Archive #2 2001

Click here for CRA Reporter Archive #1 2001 (Jan. 1 - March 31, 2001)

Click here for CRA Reporter Archive #5 2000 (Sept. 25 - Dec. 31, 2000)

Click here for CRA Reporter Archive #4 2000 (July 17-September 25, 2000)

Click here for CRA Reporter Archive #3 2000 (May 29-July 17, 2000)

Click here for CRA Reporter Archive 2000 #2 (March 27-May 22, 2000)

Click here for CRA Reporter Archive 2000 #1 (Jan.-Mar. 27, 2000)

Click here for CRA Reporter Archive #6 (Nov. 15 - Dec. 31, 1999)

Click here for CRA Reporter Archive #5 (Oct.- Nov. 8, 1999)

Click here for CRA Reporter Archive #4 (Aug.-Sept., 1999)

Click here for CRA Reporter Archive #3 (June-July, 1999)

Click here for CRA Reporter Archive #2 (April.-May, 1999)

Click here for CRA Reporter Archive #1 (Feb.-March, 1999)

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