The office of New York Attorney General Eliot Spitzer has started an investigation into dubious lending practices by the subprime lenders. Letters have been released to companies with large proportions of their clients being borrowers with less-than-stellar credit history, high relation of debt to income or high debt level. Spitzer’s office is also looking into loan-pricing data revealed by the lenders under the Home Mortgage Disclosure Act. The Attorney General whose investigations into mutual fund practices, insurance industry have already rocked Wall Street, is now interested in whether subprime lenders might be using abusive practices with elderly, minorities and other groups.

The two lenders that received requests for information are Citigroup Inc. and HSBC Holdings PLC. A Citigroup spokesman said, "We briefed the Attorney General’s office on our data last month as a courtesy, and we are working with the staff to provide follow-up information."

HSBC’s HFC and Beneficial consumer-finance units as well as Citigroup’s CitiFinancial subsidiary are serving a great number of subprime clients. The recent rise in subprime lending has given rise to complaints that vulnerable categories are abused as lenders offer them unfavorable terms, capitalizing on their inexperience with home-buying. Two recent Congress bills on predatory lending address the same problem.