Lender Will Pay Millions to Settle Predatory Lending Claims

Household International, one of the nation's biggest lenders to people with bad credit, said Friday it will pay up to $484 million to settle claims it duped tens of thousands of mostly poor home buyers across the country with hidden and unnecessary costs. Officials from 19 states and Washington, D.C., had accused Prospect Heights, Ill.-based Household of misrepresenting loan terms and keeping cost information from home buyers.

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Household International, one of the nation’s biggest lenders to people with bad credit, said Friday it will pay up to $484 million to settle claims it duped tens of thousands of mostly poor home buyers across the country with hidden and unnecessary costs. Iowa Attorney General Tom Miller and other officials said it was the biggest settlement ever in a predatory lending case. Household did not admit to any wrongdoing, but apologized and agreed to new lending practices and better monitoring of real estate loans. Officials from 19 states and Washington, D.C., had accused Household of misrepresenting loan terms and keeping cost information from home buyers. They said many borrowers lost their homes or came close to losing them because their monthly payments were higher than expected. “Owning a home to raise your family in is at the core of the American dream,” Illinois Attorney General Jim Ryan said. “But because of the alleged deceptive practices in this case, many consumers found that dream turning into a financial nightmare.” The settlement money will go into a restitution fund for borrowers. The amount in the fund could range from $387.5 million to $484 million, depending on how many states participate. Household climbed $1.90 to $28.20 Friday on the New York Stock Exchange. But two bond-rating firms downgraded the company, which is the parent of the Household and Beneficial finance companies. Consumer advocates have long criticized Household’s practices, saying the company often added thousands of dollars for insurance that was not required, failed to disclose closing costs and overcharged customers in transactions intended to lower interest rates. Maude Hurd, president of the Chicago community activist group ACORN (Association of Community Organizations for Reform Now), said the settlement is a good start. “We hope the company will now show the same willingness to work with the class of borrowers who have been hurt by their practices to resolve their issues and commit to doing business in a different way,” she said. Household did not address the charges in its apology. “For 125 years, we have set high standards for ourselves as a company, and we apologize to our valued customers for not always living up to their expectations,” said William F. Aldinger, chairman and chief executive. Each state’s share will depend on the amount of local Household real estate loan business. California officials said the company agreed to deposit $90 million in a fund for borrowers who can prove they were overcharged. Michigan officials said they expected $14 million to go to 10,000 borrowers, while Illinois consumers are expected to get $11 million. Household still faces lawsuits in California, Illinois and Massachusetts over its lending practices. Aldinger said those cases will be resolved soon without significant cost to the company. In addition to the restitution money, Household agreed to limit certain home loan penalties and fees, improve disclosures to consumers and eliminate “piggyback” second mortgages. Copyright 2002 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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