By the Division of Banks

News Release

Contact: Sarah Nathan

December 22, 2003

(617) 727-2543

Lizzie Lewis

(617) 973-8707

BOSTON - Close to 11,000 Massachusetts consumers are receiving refund checks this month as a result of a landmark $13.5 million settlement with Household Finance Corporation (HFC) or Beneficial Finance resolving allegations of predatory lending, Attorney General Tom Reilly and Division of Banks Commissioner Thomas J. Curry announced today.

The refund checks, many of which have already been mailed out, should arrive no later than the end of December. The total amount of the Massachusetts settlement is $13,525,447 and, while restitution amounts vary from consumer to consumer, the average payment is $1,234.98.

"This settlement provides real relief to thousands of Massachusetts consumers who have been the victims of predatory lending," AG Reilly said. "As this settlement illustrates, lending companies that engage in unfair or abusive practices will be held accountable for their actions. I am committed to making sure all mortgage lenders that do business in Massachusetts treat our consumers fairly and comply with the law."

"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," Commissioner Curry said. "This settlement is important not only for the restitution for consumers but also serves as a model to prevent further predatory practices."

The settlement provides restitution to consumers who obtained a mortgage or home equity loan directly from Household or Beneficial between January 1999 and September 2002. The Household settlement, which provides $484 million to consumers nationwide, is the largest ever obtained by state attorneys general and financial regulators in a consumer protection case.

Household International, through its subsidiaries, Household and Beneficial Finance, is one of the nation's largest sub-prime mortgage lenders. 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, 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 coordinated efforts that ultimately led to a multi-state settlement.

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.

In addition to consumer restitution, 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 also 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.

Questions about settlement checks and the claims process should be directed to the Household-Beneficial Settlement Administrator at (888) 780-2156. Consumers can receive additional information about predatory lending at AG Reilly's website, www.ago.state.ma.us. Consumers can also refer questions or complaints to AG Reilly's Consumer Complaint Hotline at (617) 727-8400.

The Household case is being handled by Assistant Attorney General Judith Whiting of AG Reilly's Consumer Protection and Antitrust Division.