Peter C. Harvey, Attorney General

Division of Consumer Affairs
Reni Erdos, Director

For Immediate Release:
December 16, 2003

For Further Information Contact:
Lee Moore, (609) 292-4791 or
Jeff Lamm (973) 504-6327

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.