October 11, 2002
Sean Caine, 410-576-6357
ANNOUNCES $484 MILLION MULTI STATE
SETTLEMENT WITH HOUSEHOLD FINANCE,
MARYLAND TO RECEIVE MORE THAN $10 MILLION
Attorney General's Office and Commissioner of Financial Regulation
to Work Out Details of Consumer Restitution
General J. Joseph Curran, Jr. announced today a landmark settlement
in which mortgage lender Household Finance Corp. has agreed with
state government regulators to change its lending practices. Household
also agreed to pay up to $484 million to consumers nationallymore
than $10 million to Maryland consumersfor alleged unfair and
deceptive lending practices in the "subprime" market.
The direct restitution amount is believed to be the largest ever
in a state or federal consumer case.
investigation by state Attorney General offices and banking and
financial regulators alleged that Household violated state laws
by misrepresenting loan terms and failing to disclose material information
to borrowers. Consumers complained that Household charged far higher
interest rates than promised, charged costly prepayment penalties,
or deceived consumers about insurance policies. The amount of loan
fees were often misrepresented or not explained at all. In many
of the cases, borrowers' monthly payments jumped dramatically, and
some consumers were put at risk of losing, or did lose, their homes.
the settlement, Maryland consumers could receive more than $10 million
in total restitution. Approximately 7,500 Maryland consumers took
out real estate loans with Household since 1999, the year the states
allege the problem practices began.
agreement paves the way for more Marylanders to achieve their dream
of home-ownership," Attorney General Curran said. "It
represents another battle in the war against predatory lending practicesa
war we will continue to wage until no Marylander is unfairly deprived
of achieving the American dream of home ownership."
are pleased that Maryland will participate in this multi-state settlement
to bring restitution to citizens who may have been harmed. I appreciate
the support of the Glendening-Townsend Administration and the Maryland
General Assembly in providing resources to pursue these types of
complaints," said Commissioner of Financial Regulation, Mary
Louise Preis. "As a result of the hard work of consumer groups
like ACORN, we have been continuously monitoring lending practices
and investigating consumer complaints regarding Household Finance
for nearly a year."
settlement includes Household International, Inc. (the parent company),
Household Finance Corp., Household Realty Corp., and Beneficial
Finance Corp. Household is based in Prospect Heights, Illinois.
Under the settlement, Household agreed to:
up to $484 million in restitution to consumers nationwide.
prepayment penalties on current and future loans to only the first
two years of a loan.
that new loans actually provide a benefit to consumers prior to
making the loans.
up-front points and origination fees to 5 percent.
and improve disclosures to consumers.
states to cover the costs of the investigations into Household's
"piggyback" second mortgages.
Agreement in Principle announced today between Household and the
States will be contained in consent decrees to be presented to state
courts throughout the country. The Attorney General's Office and
the Commissioner of Financial Regulation are in the process of obtaining
records from Household and will be identifying consumers who are
entitled to restitution by the middle of next year.