December 17, 2002
Sean Caine, 410-576-6357
SETTLES WITH HOUSEHOLD FINANCE,
MD CONSUMERS TO RECEIVE OVER $12.8 MILLION
General J. Joseph Curran, Jr., announced today that he and the Commissioner
of Financial Regulation have formally entered into a settlement
with Household Finance Corp. through a consent judgment filed Monday
in Baltimore City Circuit Court. Household will pay a total of $484
million in consumer restitution nationwide--the largest direct restitution
amount ever in a state or federal consumer case.
will change its lending practices under the settlement," Curran
said, "and it will pay Maryland consumers over $12.8 million
in restitution for alleged unfair and deceptive lending practices
in the subprime lending market."
states had alleged that Household violated state laws by misrepresenting
loan terms and failing to disclose material information to borrowers.
The investigation focused on real estate-secured loans. Consumers
complained that Household charged far higher interest rates than
promised, charged costly prepayment penalties, and deceived consumers
about insurance policies. Some consumers were trapped in costly
loans by some of the practices, the states alleged.
cooperated in the case when the states presented their concerns.
In addition to restitution, Household agreed in the settlement to
numerous injunctive terms. Household will:
Ensure that new home 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.
Eliminate "piggyback" second mortgages.
do not need to contact the Attorney General or Commissioner of Financial
Regulation at this time. Consumers who may be entitled to restitution
will be identified from Households records and contacted.
consumers who have moved and who had real estate-secured loans with
Household during the period in question (January 1, 1999, through
September 30, 2002) may wish to contact Currans office at
410-576-6574 to provide a current address.
Curran has long been outspoken on the issue of predatory lending,
utilizing public service announcements and town hall meetings to
educate Marylanders about the practice. Earlier this year, Currans
Consumer Protection Division ordered four men (all real estate lenders,
appraisers or sellers) and their five companies to pay over $2 million
to consumers it had misled and/or deceived in connection with numerous
real estate transactions.
position on predatory lending practices is that they are detrimental
to consumers and undermine the integrity of the marketplace,"
said Maryland Commissioner of Financial Regulation Mary Louise Preis.
"The settlement agreement will not only provide monetary relief
to Maryland consumers, but we hope it will cause responsible lenders
to re-examine their consumer lending practices to determine whether
or not they are treating consumers fairly. In the end, this will
benefit all consumers."
tentative settlement was announced October 11, but the settlement
and restitution amount were contingent on settlement by Monday with
states representing at least 80 percent of the dollar volume of
Household's real estate-secured loans. Consent judgments are being
filed by Monday's deadline in all fifty states and the District
of Columbia, which means Household will pay the maximum restitution
amount of $484 million.
settlement will not be affected by the acquisition of Household
Finance by HSBC, the giant banking and financial services company
headquartered in London. The States' settlement with Household is
binding on any successor company that might acquire Households
retail branch mortgage lending operations.
sincerely hope that this settlement will provide momentum for improving
the industry. Our Consumer Protection Division will continue to
work with the Department of Financial Regulation and other law enforcement
agencies to make the fight against questionable practices in the
lending industry a high priority," Curran said.