Citibank 2009 Annual Report Download - page 44

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Japan Consumer Finance
Citigroup continues to actively monitor a number of matters involving its
Japan Consumer Finance business, including customer refund claims and
defaults, as well as financial and legislative, regulatory, judicial and other
political developments, relating to the charging of “gray zone” interest. Gray
zone interest represents interest at rates that are legal but for which claims
may not be enforceable. This business has incurred and will continue to face
net credit losses and refunds, due in part to the impact of Japanese consumer
lending laws passed in the fourth quarter of 2006 and judicial and regulatory
actions. In addition, legislation effective in 2010 will impose a lower interest
rate cap and lower lending cap on consumer lending in Japan, which may
reduce credit availability and increase potential claims and losses relating to
gray zone interest.
Citi determined in 2008 to exit its Japanese Consumer Finance business
and has been liquidating its portfolio and otherwise winding down the
business. Citi continues to monitor and evaluate both currently and
previously outstanding accounts in its Japanese Consumer Finance business
and its reserves related thereto. However, the trend in the type, number and
amount of claims, and the potential full amount of losses and their impact
on Citi requires evaluation in a potentially volatile environment, is subject to
significant uncertainties and continues to be difficult to predict.