Friday, Oct. 11, 2002 | 11:12 a.m.
CHICAGO -- Officials disclosed today that Household International Inc., one of the nation's largest lenders, will pay up to $484 million to settle allegations of predatory lending, including charges it duped borrowers into agreeing to home loans with more expensive terms than had been promised.
Nevadans will receive an estimated $4.5 million of the restitution pool.
Officials from 19 states and Washington D.C. charged that Household violated state consumer fraud acts by misrepresenting the terms of loans and not disclosing information to borrowers. Because borrowers' monthly payments were higher than expected, many either lost their homes or found themselves at risk of losing them, a statement by the state officials said today.
"Owning a home to raise your family in is at the core of the American Dream," Illinois Attorney General Jim Ryan. "But because of the alleged deceptive practices in this case, many consumers found that dream turning into a financial nightmare."
In addition to the financial settlement, which is intended to compensate consumers, the agreement requires Household to change its lending practices.
"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," William F. Aldinger, chairman and chief executive officer of Household, said in a statement.
Because the settlement reached is tentative, Nevada consumers affected by Household's lending practices will have to wait before they can apply for restitution.
Consumer Advocate Tim Hay, who represented Nevada in the negotiations for the attorney general's office, said details of the settlement and the consumer restitution process are still being planned and will be announced at a later date.
Household's lending practices varied from state to state, Hay said, requiring each state to come up with its own restitution plan.
Deputy Attorney General Kathleen Delaney said Nevadans represented 0.94 percent of Household's total sales volume nationwide, meaning that the restitution pool for state residents would be about $4.5 million. She said about 2,500 Nevada consumers are expected to be eligible for refunds.
Delaney said her office hopes to have the restitution plan in place and eligible consumers identified by the end of October with payments to be made in November.
Consumers who are eligible for refunds will be identified by the company, but Household customers who believe they are eligible should submit a complaint in writing to the Financial Institutions Division of the Nevada Department of Business and Industry on the Internet at http://fid.state.nv.us or by mail to 2501 E. Sahara Ave., Suite 300, Las Vegas, NV 89104.
An information hotline -- at 486-3132 -- will be periodically updated.
In addition, the attorney general's office and other states will be reimbursed $100,000 to cover administrative costs associated with the investigation.
Prospect Heights, Ill.-based Household International is the parent company of the Household and Beneficial finance companies.
Officials said the restitution fund could range from $387.5 million to $484 million, depending on how many states participate. Each state's share will be in proportion to its share of Household's real estate loan business.
Still, Michigan officials said they expected about $14 million to go to 10,000 borrowers.
California officials said the company agreed to deposit $90 million in a restitution fund to be distributed by the state Department of Justice to borrowers who can prove they were overcharged by Household International on home equity and similar loans.
The payment will settle the company's alleged unfair business practices, officials said, which are broader allegations than the complaint the company settled with California in January. At that time, Household agreed to pay California $12 million to settle alleged violations of state lending laws and regulations.
Subsequent settlements with the state of Washington and elsewhere led to the nationwide settlement, officials said.
The settlement is larger than the $215 million Citigroup Inc. agreed earlier this year to refund to settle federal charges of deceptive lending. That settlement was the largest in the history of the Federal Trade Commission.
Under the agreement, Household agreed to:
California regulators estimated that predatory lending costs residents there nearly $1 billion a year in excessive fees and interest rates, based on a nationwide study of banking data last year by the North Carolina-based Coalition for Responsible Lending.
Other states involved in the investigation were Arizona, California, Connecticut, Florida, Idaho, Illinois, Iowa, Massachusetts, Michigan, Minnesota, North Carolina, New Jersey, New Mexico, New York, Ohio, Texas, Vermont, Washington, Wisconsin and Washington, D.C.
The Las Vegas Sun contributed to this report.
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