By the Division of Banks

News Release

Contact: Sarah Nathan

August 6, 2003

(617) 727-2543

Lizzie Lewis

(617) 973-8707

BOSTON - Close to 13,000 Massachusetts consumers who obtained mortgage or home equity loans with Household Finance Corporation or Beneficial Finance are eligible to make claims for payment from the $13.4 million settlement fund, Attorney General Tom Reilly and Massachusetts Commissioner of Banks Thomas J. Curry announced today.

The landmark settlement, announced in October and finalized in December, provides restitution to Massachusetts consumers who obtained a mortgage or home equity loan directly from Household or Beneficial between January 1999 and September 2002. The Household settlement is the largest ever obtained by state attorneys general and financial regulators in a consumer protection case.

I am pleased to have reached an agreement that provides real relief to thousands of Massachusetts consumers who fell victim to Household's predatory lending tactics," AG Reilly said. " This agreement sends a strong message to the lending community that predatory lending practices will not go unnoticed and will not be tolerated."

Under the terms of the national settlement, which involved all 50 states and the District of Columbia, Household agreed to pay $484 million nationwide and revamp its business practices to resolve allegations of predatory lending.

The Division of Banks has had a long-standing policy of zero-tolerance for predatory and abusive lending practices through our strong consumer protection regulations and strict enforcement," Banks Commissioner Curry said. "This settlement is important for consumers and will serve as a model for the industry to prevent further predatory practices."

Household International, through its subsidiaries, Household and Beneficial Finance, is one of the nation's largest sub-prime mortgage lenders. AG Reilly's Office and the Division of Banks, along with state Attorneys General and banking and financial regulators from 18 other states and the District of Columbia, began coordinating efforts in early 2002 after identifying a pattern of complaints from borrowers who said they had been misled into agreeing to home loans with far different and much more expensive terms than had been promised.

The Association of Community Organizations for Reform Now (ACORN), a grassroots advocacy group with a focus on predatory lending, also brought examples of Household's alleged practices to state regulators' attention. ACORN has also sponsored separate lawsuits against Household in several states, including Massachusetts.

In addition to returning $484 million to consumers, Household also agreed to implement a series of reforms in its lending operations. Court injunctions in place in all 50 states restrict prepayment penalties on current and future home loans, prohibit loan "flipping," limit up-front points and origination fees, and improve loan disclosures.

The Massachusetts settlement distribution plan provides additional compensation to borrowers who were subject to excessive loan points or to credit insurance "packing," or whose Household or Beneficial loans exceeded 100 percent of the value of their homes. The size of the individual payment depends on the presence of these loan factors and the amount of the consumer's loan.

On August 8, the states' settlement administrator will mail a notice to all Household and Beneficial borrowers who are eligible to receive a settlement payment. This notice will be followed by a letter from AG Reilly, along with a claim and release form showing the minimum amount consumers will receive if they decide to participate in the settlement. Consumers who wish to take part in the settlement must complete and return the claim and release form no later than October 14, 2003. The actual settlement payments will be then be paid directly to the consumers by check before the end of the year.

Household mortgage loan customers who have questions about the settlement payment procedures can contact a toll-free number, (888) 780-2156. The settlement administrator's website address is

Consumers may also call AG Reilly's Consumer Hotline at (617) 727-8400 for additional information or visit AG Reilly's website at

Assistant Attorney General Judith Whiting of AG Reilly's Consumer Protection and Antitrust Division is handling this case with David Cotney, Senior Deputy Commissioner of Administration & Policy with the Massachusetts Division of Banks.