Citibank 2013 Annual Report Download - page 53

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is requiring all such firms to contact proactively any customers who may
have been mis-sold PPI after January 2005 and invite them to have their
individual sale reviewed (Customer Contact Exercise). Citi currently expects
to complete the Customer Contact Exercise by the end of the first half of 2014.
Additionally, while Citi is not required to contact customers proactively for
the sale of PPI prior to January 2005, it is still subject to customer complaints
and redress for those sales.
Redress, whether as a result of customer complaints pursuant to
the required Customer Contact Exercise, or for the sale of PPI prior to
January 2005, generally involves the repayment of premiums and the refund
of all applicable contractual interest together with compensatory interest of
8%. Citi estimates that the number of PPI policies sold after January 2005
(across all applicable Citi businesses in the U.K.) was approximately 417,000,
for which premiums totaling approximately $490 million were collected.
As noted above, however, Citi also remains subject to customer complaints
on the sale of PPI prior to January 2005 and, thus, it could be subject to
customer complaints substantially higher than this amount.
During 2013, Citi increased its PPI reserves by approximately
$123 million ($83 million of which was recorded in Citi Holdings and
$40 million of which was recorded in Corporate/Other for discontinued
operations), including a $62 million reserve increase in the fourth quarter
of 2013 ($30 million of which was recorded in Citi Holdings and $32 million
of which was recorded in Corporate/Other for discontinued operations).
The increase for the full year 2013 compared to an increase of $266 million
during 2012. While the overall level of claims generally decreased during
the second half of 2013, the increase in the reserves both during 2013 and
in the fourth quarter of 2013 was primarily due to an increase in the rate of
response to the Customer Contact Exercise as well as a continued elevated
level of customer complaints on the sale of PPI prior to January 2005,
which Citi believes is largely as a result of the continued regulatory focus
and increased customer awareness of PPI issues across the industry. During
2013, Citi paid $203 million of PPI claims, which were charged against the
reserve, resulting in a year-end PPI reserve of $296 million (compared to
$376 million as of December 31, 2012).
Citi believes the number of PPI complaints, the amount of refunds
and the impact on Citi could remain volatile and are subject to continued
significant uncertainty.