SUBPRIME LENDER HOUSEHOLD INTERNATIONAL MAY PAY ENORMOUS SETTLEMENT
August 9, 2003
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Mortgage Daily reports that another subprime company may enter into a predatory lending-related settlement that would be among the biggest in U.S. history.
Citing the Wall Street Journal, Mortgage Daily goes on to say that Household International Inc. may be near a settlement with state attorneys general that could total $350 million to $500 million — far bigger than the recent record $215 million settlement between Citigroup and the Federal Trade Commission.
Sanford Bernstein Research analyst Howard Mason raised the prospect of the settlement in a new research report, the Journal said, and reportedly said he believes Household has the cash to make a restitution payment of $350 million to $500 million. Mason arrived at his settlement estimate by calculating the fees, loan rates and credit insurance provided to Household clients.
The Journal went on to report that Mason also said it may prove difficult to convince the attorneys general to agree to a settlement and, if no deal materializes, there is a danger that credit-rating agencies, “unnerved by chronic regulatory problems,” could downgrade the company’s debt.
A class action suit was filed in Cook County, Illinois on behalf borrowers against Household last May. In that lawsuit, Household is accused of deliberately misleading borrowers about the terms and conditions of their loans, including high rates and fees, principal amounts which exceed the actual value of their homes, and prepayment penalties that effectively trap borrowers in overpriced loans.
The Association of Community Organizations for Reform Now — or ACORN, a constant critic of Household’s lending practices, filed a class action against the company in February, accusing Household of deliberately misleading borrowers with claims that they will save money by refinancing while trapping borrowers in overpriced loans by means of high loan-to-value ratios, prepayment penalties, and other restrictions.
The Prospect Heights, Illinois company also faces class action lawsuits from shareholders claiming that the company issued false statements about its operations. Household restated its financials in August to account differently for losses on uncollected finance charges and other fees on private-label receivables.
Editor’s Note: It always galls me when people talk about bankruptcy debtors as “crooks.” These big lenders are the real crooks, not my clients. And they defraud their customers out of hundreds of millions of dollars. Get caught? They just buy their way out.
