Citigroup relents on credit insurance

June 29, 2001
Citigroup announced yesterday that it will begin phasing out a profitable insurance offering that consumer groups and regulators say abuses borrowers, a decision that comes after months of pressure from bank regulators and Democrats on the Senate Banking Committee.
     The insurance, known as single-premium credit insurance for a home mortgage, usually is targeted at low-income borrowers, regulators and consumer groups say.
     It is significantly more expensive than other insurance, slows the rate at which borrowers build equity in their homes, increases the chance a borrower will lose his or her home, and is typically unnecessary, they say.
     Until now, Citigroup, the nation's largest banking conglomerate, has fought efforts to curtail the sale of single-premium credit insurance, which brings the company more than $500 million in revenue a year and, according to analysts, is one of its most profitable products. Consumer groups hope that its decision will increase pressure on Household Finance Corp., American General Finance Inc. and other players in the multibillion-dollar single-premium insurance industry to follow suit.