Today @citibank launched homeownersupport.com 2 help connect struggling homeowners w/ those who have been through it. Love being part of it
— Frank Eliason (@FrankEliason) December 17, 2011
When a bank tries to “reach out” to anyone, it is usually trying to accomplish one of two things: (1) selling more loans, or (2) trying to make itself look good. With its new HomeownerSupport.com, Citibank is apparently trying to do both. It’s kind of like a burglar putting up a Facebook page for his victims to “connect” with one another, talk about what wasn’t stolen, and share their upcoming vacation plans.
Customer service Twitter star Frank Eliason has his work cut out for him on this one.
— Chen Mingi (@chen_mingi) December 17, 2011
Edit: I should point out that in yesterday’s post, I noted that federal district court Judge Jed Rakoff called Citigroup a “frequent offender” of securities laws.
Citibank, U.S. Bank, Bank of America, Wells Fargo, and Pacific Capital Bancorp have been called out by the Congressional Oversight Panel for using taxpayer money to turn around and rip off taxpayers.
Essentially, taxpayers end up paying twice: once to the government, once to the banks.
Allen Harkleroad is an angry debtor who blogs about his experience dealing with debt collectors. One of his creditors, Citibank, sued him on a defaulted credit card debt. After they started the lawsuit, though, Citibank offered to loan Allen another $5,000.
It is obvious why they need a bailout; the monkeys in charge of consumer lending are hellbent on making dumb loans. But tell me again, why are we spending billions to rescue these financial geniuses?
Mann Bracken Claims to be suing me on behalf of Citibank, So Citibank Tries to Give me More Money! | Five Million Dots
Last August, I wrote about the “Speed Equity System,” a dumb idea centered around using a home equity line of credit as if it were a bank account. The basic idea is to deposit all your income into your HELOC, preventing as much interest from accumulating as possible. If you do, you can pay off a HELOC faster.
Yes, it works, but I didn’t think much of the system in August, and the rash of HELOC freezes that started in April makes it clear why. The bank giveth credit, and the bank can taketh credit away. Which is just what Citibank did.
Some of the 50+ people who commented on my post on Citibank’s unilateral credit freezes seem to have learned the hard way that a line of credit is not an ATM. Even though a bank gives you a line of credit, the bank can probably take that line of credit away again under the terms of your contract.
The Speed Equity System seems like a great idea, but relying on a HELOC or a credit card for emergency expenses is a bad idea, in the first place. Relying on a HELOC for everyday expenses is a recipe for disaster.
(photo: Wikimedia Commons)
Would You Like to Be a Debt Collector? | Get Out of Debt (which, for some reason, does not allow embedding of its videos, so I grabbed the video and posted it on YouTube)
Last year, Citi promised its credit card customers that “A Deal is a Deal” – that they would be getting rid of “any time for any reason” interest rate hikes. But now that they’re facing financial problems, Citi is reconsidering this pledge. Ed Mierzwinski made the SNL connection in his blog at US PIRG, noting that Citi might “emulate Gilda Radner’s famous SNL character Emily Litella and say ‘oh, never mind,’ whenever they want to change rates and terms on otherwise good customers.”
Today’s New York Times ran this article about Citi’s impending flip flop. The Times speculates that the approach hasn’t helped their bottom line because “consumers don’t recognize the benefit, in part because of the difficulty deciphering the fine print among offers from different banks.” I’d also bet that Citi’s pledge to refrain from this abuse wasn’t bringing in new customers because people don’t understand its prevalence among other card companies. It’s hard to comparison shop when you don’t know what to compare.
According to Glenda, she paid $600 to get her home re-appraised after Citibank suspended her home equity line of credit. All to no avail, as she has been unable to get Citibank to reopen her line of credit, even though the appraisal shows she has equity in her home.
From the comments, it looks like Citibank’s HELOC freeze is causing more than just a few bounced checks. Reader Barbara Clark says Citibank reported the loan as suspended on her credit report, turning it into a major negative account and trashing her credit.
I just spoke with a homeowner who bounced a check to her tree service because Citibank suspended her home equity line of credit before notifying her. When she finally received a notice from Citibank in the mail, it suggests that (PDF link) Citibank is apparently suspending home equity lines of credit nationwide due to falling home values. The same thing apparently happened to Nina at Queercents just over a week ago.
The Citibank HELOC contract apparently gives them the right to suspend or reduce the credit limit of accounts when the homes value drops too far. But Citibank based its decision on a general finding that “home values in your area, including your home value, have significantly declined,” not a specific appraisal.
Further, Citibank has not simply reduced the available credit limit to compensate (which would be difficult, since it does not actually know the home’s value), but has suspended the account entirely. Andthe biggest problem, as my caller demonstrated, is that already-written checks will bounce, because Citibank is suspending accounts before it notifies its customers. Surprise!
Obviously, since a HELOC is tied to the value of the home, lenders should be able to reduce the available credit if the home value declines. But they should also (1) have to show the home value actually has declined, and (2) notify its customers before it suspends their accounts.