It has been said that Citigroup as a behemoth is unmanageable. Over the last decade I have had several experiences with Citigroup that although at the time I have tended to dismiss them as one off problems, now I am more inclined to see them as a symptom of a company that has no idea of what it is doing or how to keep their customers happy.
Example 1: 7 years ago I opened a banking account with Citibank when I was posted in Chicago. My banking experience with them was excellent and I was a fan of their online bill payment service, which was best in the class. After about a year and half I moved to a part of the country where there were no Citibank local branches or ATMs available. So I called them to close my account and I opened a relationship with a local bank.
The call to close the account was not as straight forward as it is supposed to be. They agreed that there is no way I can realistically bank with Citibank in my new geographical location, but they recommended that I can always bank online. When I pointed out that there are no local Citi ATMs, they informed me that I can use any of the other bank ATMs to withdraw cash and make deposits. But sorry, they will not reimburse the ATM fees charged by the other bank’s ATMs. It took me some time to overcome the meaningless hard sell and finally close the account.
It is about 6 years later and I still receive regular emails from Citibank regarding my bank account (for my ATM card ending in …xxxx).
Hmm, maybe they have not figured out how to link their email systems to their active accounts properly.
Example 2: Fast forward to three days ago.
I carry the top of the line Citibank World Elite Mastercard, supposedly only offered to their best customers. They issued a replacement card with a new account number in April, as they said that my earlier account was likely compromised at a (undisclosed) merchant. This has happened before and the transition at that time happened seamlessly so I had no reason to believe that this time it would be different. They told me that my old card will stop working on a certain date in May and therefore I need to activate my replacement card prior to that day, which I did in early may.
My card was declined at a store 2 days ago. I called Citi and was told that I was overdue on my April bill. I explained to her that it is not possible as I receive electronic bill at my bank and it is set up to pay automatically. But I will go back and check my records as soon as I get home and will call the customer support with the information. I did and found that the April bill was never received.
The best we could figure out was that when they sent the replacement card, they transferred the balance from the old card to the new card but since I only activated the new card few days ago, the bill was never sent out (I don’t understand how they can transfer the balance to a new card which is not yet activated). And since no bill was sent out, none was paid.
Here is a little background: Ever since I have had this card with Citibank, the bill has always been paid on time and in full. I never carry a balance, never charge more than 25% of my credit limit, etc. I have excellent credit. In short, one of the least risky customers that the bank has.
Anyhow, the customer service (had to go to the supervisor) was nice enough to admit that this was their fault and the transition was not handled properly and they will make a notation on the account and will credit back the late fee and the finance charges. I made the payment online (on a saturday) and it is estimated to hit their books on Tuesday.
Here is the kicker: Starting Sunday, I have been receiving calls from Citi Collections, 4-5 times a day on my cellphone over the past due amount. Since they never leave a message, it has been hard to talk to them. Today I did manage to get a live person to talk and she told me that there is no way to stop these automated calls until the check is posted to the account. I had to tell her that maybe they should consider fixing their system.
What is the point of having a premium-elite-gilt-edged account with Citibank if they do not have a courtesy to call and warn you of a potential problem before they start declining charges? And why after you admit it is your problem and that it is now resolved, do you continue to make collections calls. And why is your grace period now less than a week? Citibank is now getting aggressive in dealing with credit card delinquencies by turning accounts over to collections even if the account is past due by 1 day. Yes, this has been an annoyance and maybe they will fix the situation, but I have to wonder if they have been so callous with their best customers in highest level of relationship accounts (to the point where I am now seriously considering taking my business elsewhere), maybe they will succeed in getting rid of their least risky customers and be left behind with only the risky ones. It is good to be aggressive but you do not need to bite the hand that feeds you.
But worst of all, it confirms what I suspected earlier, left hand at Citi does not know what the right hand is doing. As such, I would seriously advise anyone considering buying Citi stock to reconsider and if you already own the stock then figure out an exit. The problems at Citi run deep and a de-facto government ownership is likely to make it even worse.
Freefrombroke recently wrote an article that Credit Cards don’t Suck, You Suck. I will have to add to this by saying sometimes credit cards don’t suck, you don’t suck, but the credit card company sucks!
As Economic Recovery Takes Hold, Get Ready for a Changing Regulatory Environment
Bank of America CEO Ken Lewis feels that the economy is bottoming out and the worst is likely behind us. Other business leaders report stabilization in their business as well with some tech CEOs even seeing an uptick in their businesses. The Feds also report seeing tentative signs of economic recovery and estimate that the economy will start showing more palpable recovery later this year. However, they think that the unemployment rate will likely touch 10%.
It is debatable whether the signs out there do point to a real economic recovery taking place. Calls for the bottom have been made many times during this recession (including Buffett’s call to Buy America) but so far they have been more of a miss. When the economy does indeed recover, the financial landscape in America (and possibly around the globe) will have changed.
Changing regulatory environment
Take for example the two fixtures in the financial regulatory setup, SEC and the Federal Reserve. Federal Reserve was created nearly 100 years ago in response to a financial crisis. It is a curious institution of sorts, as it is not really a government agency but more of a public-private hybrid institutions, where private banks have a great say in how the Federal Reserve is run and who the office bearers are. This quasi-private institution is essentially in charge of some of the basic functions of a state: controlling the money supply and setting the interest rates (cost of credit). As such, there have been questions often asked about the relationship of the Fed with the private banks in the country and whether there are conflicts of interest that impair the Fed from making right decisions at all times.
SEC on the other hand was established to oversee the proper functioning of the securities market in the US. For much too long, SEC has been too close to some of the entities they were supposed to be regulating resulting in much inaction and letting abusive market practices slide by unchecked.
Obama administration now proposes to overhaul the regulatory structure in US by bringing disparate agencies and their functions together and consolidating regulatory powers in a unified agency. Additionally, the administration also wants to regulate mortgages and credit cards through this new agency (or a similar agency for the consumer credit). Already, many credit card companies are up in arms saying new regulations on credit cards will make credit harder to get for an average consumer, even if the consumer sports an exemplary credit history.
While no fan of government regulations, I believe some is needed to avoid the country getting drunk on loose credit as it happened. Reduction in use of credit cards is not bad in my book and if it serves to help the consumers rediscover the benefit of living below their means, that it is all good. I do not believe that the credit card industry has a god given right to expand and grow at all costs. However, the government needs to take care not to extend their reach so deep that credit becomes scarce for legitimate businesses. The concept of risk taking and spirit of entrepreneurship needs to live on. If anything, credit situation needs to be eased for businesses so new start-ups and entrepreunerial companies can get funds without having to tap into a founder’s personal credit card, which will probably become more difficult to do in the future.
Maybe the SBA needs a revamp too.
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Posted in Commentary.
Tagged with Economy, regulatory environment.
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By Arohan – May 20, 2009