Local News

Cooper Strikes Landmark Agreement As Crackdown On Predatory Lenders Continues

Posted December 16, 2002

— Attorney General Roy Cooper has won final court approval of a landmark agreement with mortgage lender Household International that will mean more than $10.8 million in refunds for borrowers in North Carolina.

"With this agreement in place, Household consumers will get well-deserved refunds," Cooper said Monday, "and all consumers will have better access to credit on fair terms.Because Household has agreed to change the way it does business and deals with its customers, we have set a new standard for the entire mortgage lending industry."

Under an agreement made binding Monday by Wake County Superior Court Judge Howard Manning, Jr., and by courts in 49 other states and the District of Columbia, Household will repay its customers $484 million and reform its lending practices.

Cooper, who serves as chair of the National Association of Attorneys Generals' Consumer Protection Committee, spearheaded the final settlement negotiations in October along with Iowa Attorney General Tom Miller, Washington State Attorney General Christine O. Gregoire and New York Banking Superintendent Elizabeth McCaul.

The courts from 19 other states allege that Household and its subsidiaries misled borrowers about the costs of mortgage loans. State investigators discovered that Household had failed to tell some borrowers about punitive prepayment penalties imposed on their loans.

Household also added expensive credit insurance premiums to loans without borrowers' consent. Other borrowers were promised lower interest rates but were then charged as much as 12 to 18 percent.

To settle these allegations, Household agreed to pay refunds of $484 million, to improve disclosures, to ensure that its loans provide consumers a net benefit and to limit prepayment penalties to the first two years of loans.

Much of the injunctive relief mirrors North Carolina's predatory lending law, which Cooper authored as a state senator.

"I'll keep working to crack down on predatory lending so that all families can have access to fairly priced loans," Cooper said.

North Carolina borrowers' share of the multi-state settlement will total $10.8 million.

Approximately 7, 500 North Carolinians took out first mortgage loans with Household from 1999 to 2002.

Under terms of the settlement, North Carolina consumers could share up to $9 million in refunds. Those eligible for a refund will be contacted directly by the settlement administrator in the coming months.

The Household agreement follows on the heels of a $20.2 million settlement Cooper negotiated with The Associates last year, the largest consumer protection settlement in state history.

North Carolina was the first state to target The Associates for "packing" single premium credit insurance into its loans. The Federal Trade Commission has since negotiated a national settlement with The Associates' parent company, Citigroup.

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