By Luis Perez
Staff writer

When a medical condition forced Vivloria Herring to leave her job in 1998, she was afraid of losing her home at 214 W. Newell St. because she owed $5,000 in unpaid back taxes and about $27,000 in home loans.

Herring, 62, applied for a second mortgage, first from Fleet Bank and then M&T Bank. Both banks denied her.

"I just wanted to get out of trouble," she said last week. "I had nowhere to go."

She went to Associates Consumer Discount Co.'s North Syracuse office, which specialized in making subprime loans for people with poor credit. Herring got a loan for $42,120, but it cost her about $8,000 in points and fees, and the interest rate was 16.32 percent, more than double what most banks were charging at the time.

The lending practices of Associates are the subject of a lawsuit by the Federal Trade Commission. The FTC is suing Citigroup, the parent company of Citifinancial Mortgage Co., which bought Associates in 2000. An FTC representative will be in Syracuse today to explain the lawsuit and see if there are other residents who took out high-interest loans.

Herring's case was one of five that Syracuse United Neighbors asked Citifinancial to review in February. SUN points to Herring's plight as an example of the predatory lending practices used by some companies that specialize in lending money at high interest to people with credit problems. Those companies have targeted residents on Syracuse's South and Near West sides, SUN officials said.

The FTC filed a federal lawsuit in January 2001 against Citigroup, accusing Associates of engaging in predatory lending. Among other charges, the FTC accused Associates of false advertising, telling borrowers that refinancing existing loans could save them money, said Joel Winston, associate director for financial practices at the FTC.

"Generally speaking, it was going to cost you a lot more with the new loan," Winston said.

Last month, the FTC settled a similar lawsuit for $60 million against the California-based First Alliance Mortgage Co., which filed for bankruptcy. That case involved about 18,000 borrowers.

The "Associates case is at least 10 times that size," Winston said. "So the potential harm to consumers is much larger."

Christina Pretto, a spokeswoman for Citigroup, declined to talk about the specific allegations in the lawsuit.

"We regret that we have been unable to resolve the FTC claims regarding past practices of the Associates without litigation," according to a statement by Citigroup. "From the time we announced our intent to acquire Associates, we indicated our full commitment to resolve concerns that had been raised about their business."

Citigroup has reached out to nearly a half-million customers, including every Associates home loan customer, and will continue to do so, the statement said.

In four of the five cases that SUN brought up for review, Citifinancial agreed to reduce the interest rates on the loans.

The terms of Herring's loan changed so the $3,100 she paid in points will be applied to the remaining principal balance of $39,300. The interest rate was cut from 16.32 percent to 9.99 percent, reducing her monthly payments from $661 a month to $453.42.

SUN officials estimate Herring will save $30,000 in interest over the next 11 years as the result of changes in the loan terms. And Herring feels she won't have a problem keeping up with her bills now.