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Attorney General Lockyer Announces $92 Million on Way to California Customers of Household Finance
$484 Million National Settlement Reimburses Consumers in Predatory Lending Case
(SACRAMENTO) – Attorney General Bill Lockyer announced refund checks totaling $92.4 million will be mailed to Californians, starting today, under the national settlement of a predatory lending case against Household Finance.
"Thousands of hard-working Californians went to Household for financial help, only to be victimized by deceptive sales practices, exorbitant fees and overpriced insurance," said Lockyer. "In a few days, the restitution they have long-deserved finally will arrive."
All told, 64,868 Californians who elected to participate in the settlement will receive refund checks. The average California claimant will receive $1,424.46. Most of the checks will be mailed today. Some, however, will be sent December 31, 2003. Of all eligible Household customers in California, 77.8 percent opted into the settlement. Those who chose not to participate retain their right to file lawsuits against the company.
Household reached the settlement with all 50 states' Attorneys General and/or banking and finance regulators. In California, Lockyer's office and the Department of Corporations signed the settlement.
The settlement resolves the states' allegations that Household and its affiliates misrepresented loan terms, deceived consumers about credit insurance, charged exorbitant loan origination fees and imposed excessive penalties on customers who paid off their loans early. Californians who receive reimbursement will recover about 19 percent of their loan origination fees, and prepayment penalties and credit insurance premiums charged and not refunded.
Besides consumer reimbursement, the settlement requires Household to reform its business practices. The company cannot impose prepayment penalties unless the balance is paid off two years or less from the date the loan is signed. Household also cannot charge consumers more than 5 percent of the principal to originate a real estate-secured loan. Additionally, Household must inform customers that credit insurance is optional, and make other specified disclosures. In offices that conduct transactions in Spanish, Household must provide Spanish-language loan documents.