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Post date: December 11 2003

Refunds In Landmark Predatory Lending Case To Be Mailed

Attorney General Spitzer today alerted consumers to check their mailboxes for refund checks related to the landmark settlement in the predatory lending case against Household Finance. Checks could be delivered as early as next week, but should arrive no later than the end of the year.

"Although the harm suffered by victims of predatory lending practices can never be entirely rectified, the restitution in this case is significant and will help many families," Spitzer said. "My office will continue to aggressively pursue any financial institution operating in New York State that engages in abusive and unscrupulous lending practices."

In December 2002, New York led 20 states in settling a case against Household International, the parent company of Household Finance Corporation and Beneficial Finance Corporation - two of the country's largest sub-prime mortgage lenders. Household agreed to pay $484 million in restitution to consumers nationwide, including approximately $37 million to eligible New Yorkers.

Since that time, all 50 states and the District of Columbia have agreed to participate in the landmark settlement that has changed the way the sub-prime lending industry practices.

New York State Banking Superintendent Diana L. Taylor said: "Governor Pataki has made protecting consumers a statewide priority. He has directed the Banking Department to work cooperatively with law enforcement to aggressively pursue those who prey on unsuspecting and vulnerable consumers. We're very proud of the restitution we have gotten from Household for New Yorkers, and we are pleased that a full 88.4 percent compared to a national rate of 81 percent of the New York victims of these predatory loans are taking advantage of the settlement, in amounts adding up to thousands of dollars in most cases."

Under the terms of the settlement, New Yorkers who obtained real estate loans through Household or Beneficial between January 1999 and September 2002 were eligible to receive restitution.

Last August, eligible borrowers were contacted by a third party administrator which offered them the opportunity to "opt-in" to the settlement, thereby making themselves eligible for refund checks. Individuals had until October 14th, 2003 to sign and return the necessary forms in order to participate in the Household settlement case.

In New York State alone, more than 21,700 consumers opted-in to receive refunds covering more than 35,800 loans. In total, they will receive restitution of over $37.6 million. Regionally, restitution will be provided as follows:

  • Long Island and New York City: over 6,200 borrowers will share nearly $10.8 million;

  • Hudson Valley: nearly 2,500 borrowers will share approximately $4.3 million;

  • Western New York: over 3,800 borrowers will share nearly $6.7 million;

  • Central New York: nearly 2,450 borrowers will share more than $4.2 million;

  • Rochester: nearly 2,100 borrowers will share more than $3.6 million;

  • Capital Region: over 1,600 borrowers will share nearly $2.8 million;

  • Binghamton area: more than 960 borrowers will share nearly $1.67 million; and

  • North Country: nearly 1,300 borrowers will share more than $2.2 million.

Restitution payments to New Yorkers will range between $46 and $23,000. The average award New York consumers will receive is $1,730.

The landmark agreement with Household settled investigations into the sub-prime lender arising from numerous consumer complaints about overcharging borrowers with fees and interest and misleading borrowers about other loan terms such as balloon notes and credit insurance.

Spitzer noted that, in settling the case with Household, the financial institution agreed to implement a series of reforms in its lending practices. This includes: limiting its fees for making a loan to five percent of the loan amount; limiting the extent to which it can charge points or fees for refinancing a loan made the previous year; reforming and improving disclosures to consumers; ceasing to make more than one mortgage loan to a consumer within a 90-day period; and ceasing the sale or finance of single premium credit insurance on real estate loans.

Under the terms of a unique side deal hammered out by the New York State Banking Department, Household was required to provide an additional $7 million to the state. Approximately $3.4 million of this was applied to make adjustments to consumer accounts and pay consumer restitution and $2.6 million was used to fund a settlement amount. As part of this agreement, Household provided another $1 million to produce and place anti-predatory lending ads in New York City buses and subways and in newspapers and on the radio statewide.

Spitzer also praised the participation of ACORN (Association of Community Organizations for Reform Now) in the investigation leading to the settlement.

Individuals with questions about the Household case or with complaints about predatory lending are encouraged to contact the Attorney General's consumer help line at (800) 771-7755. Questions related to the processing of claim forms in this case should be directed to the third-party administrator at (888) 780-2156.

The case is being handled by Assistant Attorneys General Benjamin Bruce of the Rochester Regional Office, Mark Fleischer of the Consumer Frauds and Protection Bureau and Lisa Landau of the Civil Rights Bureau.