Citigroup's `Subprime' Reforms Questioned
New York -- HOW ANONYMOUS are mystery shoppers if store employees know they're coming?</br></br>In response to criticism of its consumer-lending practices, Citigroup Inc. almost two years ago said it would send undercover personnel to vet its consumer-finance branches, which included those of the newly purchased Associates First Capital Corp. and its own CitiFinancial unit. Soon after the program was announced, CitiFinancial telegraphed the visits to its employees.</br></br>"We will begin a Mystery Shopping Test in December and complete in January," said a November 2000 CitiFinancial memo to regional managers in the Southeast, according to a copy recently submitted to regulators. "A minority and a caucasian will visit the same or separate branches and request an identical loan."</br></br>The mystery shoppers were one of several reforms that Citigroup, the nation's largest financial-services firm, said at the time it would introduce to answer criticism of its purchase of Associates, a Dallas-based "subprime" lender to people with spotty credit records who are often turned away by mainstream banks.</br></br>Citigroup officials cite those reforms as evidence that its own CitiFinancial subprime lending operation, into which Associates was merged, is the cleanest of its kind in an industry long-sullied by dodgy practices such as frequently refinancing loans to generate fees. They add that notification to employees about mystery shopping is an effective way to keep workers alert at all times.