Citibank Korea Sued for Alleged Deception of Mortgage Customers

A group of unionized workers at Citibank Korea Inc. filed a lawsuit against the bank and one of its executives for allegedly deceiving mortgage customers by charging unfairly high interests on mortgage loans in late 2002. The lawsuit claims that the bank imposed higher interest rates than promised to mortgage takers, resulting in a huge extra profit for the lender. The unionized workers, representing KorAm Bank, cited an example where the bank extended mortgage loans at the end of 2002 with interest payments linked to market rates renewable every three months, but applied a fixed rate on the product, taking advantage of consumers' ignorance of interest rate movements. The lender's decision to merge with KorAm Bank in November last year has had no bearing on the lawsuit, which seeks to address the alleged deception in 2002.

Key Takeaways:

• The lawsuit was filed by a group of unionized workers at Citibank Korea Inc. on behalf of KorAm Bank employees who were allegedly deceived by the bank's high interest rates on mortgage loans in late 2002.
• The unionized workers claimed that the bank applied a fixed interest rate on the mortgage loans, despite promising to link it to market rates renewal every three months.
• The bank's actions resulted in a huge extra profit for the lender, which was not disclosed to the mortgage customers.
• Citibank Korea aims to increase its share of South Korea's banking market to 10% from 6-7% in November.
• The merger between KorAm Bank and Citibank Korea had no bearing on the lawsuit, which seeks to address the alleged deception in 2002.
• The bank's president, Ha Yung-ku, announced plans to offer better products for customers after merging with KorAm Bank in March.
• Richard Jackson, the executive in charge of consumer banking division, is identified as a defendant in the lawsuit.
• Citibank Korea Inc.'s South Korean unit was created through the merger between the group's banking branch and KorAm Bank in November last year.

Statistics:

• 10%: Citibank Korea's aim to increase its share of South Korea's banking market (as of November)
• 6-7%: Citibank Korea's share of South Korea's banking market in November
• 1%: Reduction in loan rates on the mortgage product in March
• 2002: Time period when the alleged deception occurred
• Late 2002: Specific period when the mortgage loans were extended with unfairly high interest rates
• November: Time when Citibank Korea and KorAm Bank were merged

Sources:

• Yonhap, July 19, 2003 (exact quote from the original text)