WASHINGTON Citigroup Inc. has acknowledged that at least some of a former employees claims of unfair lending practices at its subprime unit, CitiFinancial Mortgage, have been confirmed.
The allegations, in an affidavit signed by former loan officer Steven Toomey, are that at least one Charleston, S.C., CitiFinancial office had a policy of not giving borrowers legally required disclosures in a timely manner, that employees there regularly forged borrowers signatures on legal documents, and that loan officers were instructed to avoid telling potential borrowers about points and fees on loans.
In response to repeated phone and e-mail requests for comment, Citigroup spokeswoman Leah Johnson issued a statement Thursday that reads in part: We interviewed Mr. Toomey, and among the many allegations he described, we were able to corroborate only two isolated incidents and have taken appropriate corrective action.
She would not answer questions about what specific activities had been corroborated or what corrective action had been taken. However, Ms. Johnson confirmed that Citigroup had accepted the resignation of a manager mentioned in the Toomey affidavit, Tim Delapaz, on July 25.
Citigroup, in a statement July 9, tried to play down Mr. Toomeys allegations, saying that he had worked for CitiFinancial a short time and only in the last few weeks raised issues related to branch sales practices when he concluded that the company would not pay him monies that he demanded to resolve an employment dispute.
This was the second former CitiFinancial employee to allege that the company routinely engaged in abusive lending practices. An affidavit from the first, Gail Kubiniec, was made public by the Federal Trade Commission as part of its lawsuit filed in March against Citigroup. The company has asked a judge to dismiss the FTC case, which challenges lending done by Associates First Capital, a subprime lender Citigroup bought last November.
Though Citigroup has taken steps to clean up Associates, it remains a target for predatory lending complaints.
Mr. Toomeys affidavit was taken by Matthew Lee, the executive director of Inner City Press/Community on the Move, a fair-housing activist organization in New York City. Mr. Lee, who said he has interviewed numerous former CitiFinancial employees, has alleged that several were told they had to sign nondisparagement agreements with the company as a condition for receiving their final paychecks.
A copy of one such agreement, obtained by American Banker, 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.
Ms. Johnson would not comment on the circumstances under which employees were asked to sign the nondisparagement agreements.