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For Immediate Release
October 11, 2002
Contact: Sean Caine, 410-576-6357

CURRAN 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

Attorney 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 nationally–more than $10 million to Maryland consumers–for 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.

A multi-state 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.

Under 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.

"This 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 practices–a war we will continue to wage until no Marylander is unfairly deprived of achieving the American dream of home ownership."

"We 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."

The 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:

  • Pay up to $484 million in restitution to consumers nationwide.
  • Limit prepayment penalties on current and future loans to only the first two years of a loan.
  • Ensure that new loans actually provide a benefit to consumers prior to making the loans.
  • Limit up-front points and origination fees to 5 percent.
  • Reform and improve disclosures to consumers.
  • Reimburse states to cover the costs of the investigations into Household's practices.
  • Eliminate "piggyback" second mortgages.

The 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.

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