Citibank Lending Practices Criticized by

1. (SBU) Summary. Flemish Socialist party (Sp.A) leader
Johan Vande Lanotte has accused Citibank of predatory
consumer lending practices, targeting persons already
heavily in debt and encouraging credit card use by those
financially weak. Citibank has defended itself, both
denying inappropriate practices and defending the quality
of its loan portfolio. Citibank believes that it is being
targeted unfairly by this political party and that the
Embassy should protest the Sp.A campaign against the bank.
Comment: While post has raised the issue informally with a
Sp.A advisor, given the coming elections we are slightly
wary that our action not be misinterpreted as politically

partisan. End Summary.



2. (SBU) On March 12 Flemish Socialist party (Sp.A) leader
Johan Vande Lanotte made public statements accusing U.S.
banking giant Citibank of predatory consumer lending
practices. He claimed the bank targets persons already
heavily in debt with marketing for consolidation loans, and
encourages consumer debt through credit card use. He
believes the Bank uses misleading advertising to garner
itself a large share of Belgium's private borrowing market.
In light of these practices, Vande Lanotte was inviting
consumers to lodge complaints with the Party, and
requesting the Ministry of Economy investigate the bank and
its lending practices. Subsequent media reports note that
a Ministry inquiry is underway. Other Sp.A politicians
supported these accusations against Citibank; Sp.A Senator
Hans Bonte claimed that Belgium's federal financial sector
supervisory authority (CBFA) had done too little to protect
consumers from the bank.



3. (SBU) Citibank is defending itself actively against the
charges. In two press releases (one locally in Belgium and
another in the U.S.) and a press conference, it denied
predatory lending practices, and defended its loan
portfolio as stronger than the industry average. While
Citibank is the market leader in Belgian consumer lending
with a 20 percent share, it claims only 16 percent of its
consumer loans encounter repayment difficulties, and only 1
percent are not repaid. Belgian Managing Director Jose de
Penaranda called D/Econ Counselor to defend Citibank,
noting that guidelines from the bank's headquarters limit
the Bank's exposure to uncreditworthy clients, nor would it
be in the bank's interest to make such loans. He said
neither the bank, nor the Federation of Belgian Financial
industries (FeBelFin, which has an ombudsman's office for
consumer complaints), nor Test-Achat (Belgium's consumer
interest research group), nor the CBFA have received
complaints regarding Citibank lending.



4. (SBU) Citibank believes it is being targeted by this
political party, which is playing an inappropriate role.
Citibank management believe the Embassy should protest the
Sp.A campaign against the bank, which they believe is
politically motivated. Emboff stressed to Citibank's
public communications director that the bank's own approach
of laying out the facts and openness to client criticism is
an excellent defense. Re-channeling consumer complaints to
normal avenues for investigation is in Citibank's best
interest. On March 21, the Flemish daily De Standaard
claimed that one overzealous Citibank employee had been
fired for mining a public list of debtors of the National
Bank of Belgium (Central Bank) for prospects for
consolidation loans. While this might substantiate aspects
of Sp.A charges, it happened prior to Vande Lanotte's
announcement and indicates that the bank had addressed in-
house an inappropriate marketing action.



5. (SBU) EconCouns took advantage of a previously
scheduled meeting with an advisor to Vande Lanotte to raise
the issue March 21. While he did not appear particularly
conversant with the details, having just returned from a
three-week International Visitors Program in the U.S., the
advisor listened to concerns EconCouns expressed that
normal, appropriate channels for dealing with consumer
complaints did not appear to have been activated and that
it seemed to be trial through the media.



6. (SBU) Comment: Post welcomes State and Commerce
suggestions on handling this issue. Apparently, the
Minister of Economy can investigate banking issues, but
must forward his findings to the CBFA for action regarding
regulation and oversight of banks. An editorial in the
Belgian press faults the Sp.A for targeting Citibank when
parties have no supervisory authority, and questions why

Sp.A clamors for consumer protection action when a
politician from its own party has run the Ministries
responsible for consumer affairs for the past four years,
yet said/done nothing on bank lending policies. Regarding
Embassy engagement on the issue, although the Sp.A action
singles out an American company in the competitive Belgian
credit market, the federal elections are two months off and
post would not want its pursuit of the issue to be
construed as domestic political interference. Post
believes Citibank factual clarifications and media
criticism may move the issue out of the headlines and limit
damage to the company.

IMBRIE