NEWARK
– Attorney General Peter C. Harvey
and Department of Banking and Insurance
Commissioner Holly C. Bakke announced
today that checks totaling nearly $17.9
million are being mailed to thousands
of New Jersey consumers who obtained real
estate loans from Household International
as part of an agreement that settles the
State's portion of a landmark, multi-state
action against the firm and its subsidiaries.
According to Harvey, the checks were being
sent out today to 15,917 New Jersey borrowers
who were misled when they obtained loans
from Household International between January
1, 1999 and September 30, 2002. In addition
to its $17.9 million settlement payment
in New Jersey, Household has also agreed
to improve its disclosure practices, eliminate
"piggy back" second mortgages,
and implement other lending practice reforms.
"Today
-- through a collaborative effort between
the Department of Law and Public Safety
and the Department of Banking and Insurance
-- significant dollars are being delivered
to compensate those who were exploited
by Household's past lending practices,"
said the Attorney General. "Just
as importantly, we have acted to protect
the interests of future New Jersey borrowers
by negotiating a settlement agreement
that calls for significant changes in
the way Household does business."
"The Household case makes it clear
that New Jersey will not tolerate predatory
lending practices," Commissioner
Bakke added. "Recent legislative
initiatives have given the Department
more tools to protect consumers from such
practices in the future."
Customers complained that Household International
charged them higher rates than promised,
didn't fully explain closing costs, charged
costly pre-payment penalties and/or deceived
them about insurance policies.
"People
ended up paying more -- often far more
-- than they expected for their loans,"
said Division of Consumer Affairs Director
Reni Erdos. "These people were the
victims of predatory lending practices,
and they are entitled to compensation."
According to Erdos, Household customers
who obtained loans between January 1,
1999 and September 30, 2002, and who opted
to be parties in the settlement process,
are covered by the agreement. She said
checks going out to eligible Household
borrowers in New Jersey average $1,123,
with the minimum payment being $150. The
checks are being mailed out by the settlement
administrator.
Household International, Attorneys General
for all 50 states and the New Jersey Department
of Banking and Insurance announced a settlement
agreement in December 2002. Commissioner
Bakke noted that Household is paying $484
million to customers nationally, an amount
believed to be the largest ever in a state
or federal consumer case.
Under the settlement, Household agreed
to:
- Amend
the pre-payment penalty to include only
the first two years of the existing
loan.
- Ensure
that new loans actually provide a tangible
net benefit to consumers prior to making
the loans.
- Limit
up-front points and origination fees
to 5 percent.
- Reform
and improve disclosures to consumers
so all representations regarding loan
terms are fair, accurate and not deceptive.
- Eliminate
"piggyback" second mortgages.
Deputy Attorneys General Carol G. Jacobson
and Sharon L. Young of the Division of
Law handled negotiations for the State.
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