Christine
Household to pay $484 million
Home equity lender to pay historic nationwide settlement of accusations it overcharged borrowers
http://money.cnn.com/2002/10/11/news/companies/household/index.htm
October 11, 2002: 1:24 PM EDT
NEW YORK (CNN/Money) - Household International Inc. agreed Friday to pay $484 million to settle allegations of abusive lending practices, the biggest such settlement in U.S. history.
The Prospect Heights, Ill.-based company, one of the largest U.S. lenders to people with poor credit histories, had been accused by several states attorneys general of overcharging its customers for home equity and other loans and not informing them of the extra costs.
No formal charges were filed against Household, which said it agreed to pay the money in order to satisfy customer complaints and put the issue behind it. The company said it believes the settlement to be the largest such of any consumer-credit dispute in U.S. history,
"For 125 years, we have set high standards for ourselves as a company, and we apologize to our valued customers for not always living up to their expectations," CEO William Aldinger said in a release.
Shares of Household (HI: up $2.60 to $28.90, Research, Estimates), which have dropped about 64 percent this year on concerns about the charges, jumped nearly 12 percent in midday trading Friday.
According to the settlement, which first must be approved by 80 percent of the states in which Household does business, the company will pay $484 million to reimburse customers.
The company said it would likely take a $330 million charge for the settlement in the third quarter, and added that its 2003 earnings per share would be between $4.65 and $4.90, below the $5.07 expected by Wall Street analysts polled by earnings tracker First Call.
The $484 million will be divided among all 50 states and the District of Columbia, apportioned according to the volume of business Household does in each state.
Household also agreed to make several changes in its loan application, origination and closing processes, including clearer disclosures to help customers understand the cost of their loans.
Household has also developed what it calls a "secret shopper" program to monitor every step of the loan origination and closing process, a program Household said is unique in the lending industry.
"We are determined to be more rigorous when it comes to compliance monitoring," Aldinger said.
Household refunded $3 million to California consumers and paid $9 million in penalties to the state in January to settle allegations it deliberately overcharged an estimated 60,000 California customers.
Household also is the subject of class action lawsuits in three states, as well as a scathing report by Washington regulators saying the company uses complex wording in its contracts to manipulate borrowers into paying interest rates that far exceed industry norms.
Home equity lender to pay historic nationwide settlement of accusations it overcharged borrowers
http://money.cnn.com/2002/10/11/news/companies/household/index.htm
October 11, 2002: 1:24 PM EDT
NEW YORK (CNN/Money) - Household International Inc. agreed Friday to pay $484 million to settle allegations of abusive lending practices, the biggest such settlement in U.S. history.
The Prospect Heights, Ill.-based company, one of the largest U.S. lenders to people with poor credit histories, had been accused by several states attorneys general of overcharging its customers for home equity and other loans and not informing them of the extra costs.
No formal charges were filed against Household, which said it agreed to pay the money in order to satisfy customer complaints and put the issue behind it. The company said it believes the settlement to be the largest such of any consumer-credit dispute in U.S. history,
"For 125 years, we have set high standards for ourselves as a company, and we apologize to our valued customers for not always living up to their expectations," CEO William Aldinger said in a release.
Shares of Household (HI: up $2.60 to $28.90, Research, Estimates), which have dropped about 64 percent this year on concerns about the charges, jumped nearly 12 percent in midday trading Friday.
According to the settlement, which first must be approved by 80 percent of the states in which Household does business, the company will pay $484 million to reimburse customers.
The company said it would likely take a $330 million charge for the settlement in the third quarter, and added that its 2003 earnings per share would be between $4.65 and $4.90, below the $5.07 expected by Wall Street analysts polled by earnings tracker First Call.
The $484 million will be divided among all 50 states and the District of Columbia, apportioned according to the volume of business Household does in each state.
Household also agreed to make several changes in its loan application, origination and closing processes, including clearer disclosures to help customers understand the cost of their loans.
Household has also developed what it calls a "secret shopper" program to monitor every step of the loan origination and closing process, a program Household said is unique in the lending industry.
"We are determined to be more rigorous when it comes to compliance monitoring," Aldinger said.
Household refunded $3 million to California consumers and paid $9 million in penalties to the state in January to settle allegations it deliberately overcharged an estimated 60,000 California customers.
Household also is the subject of class action lawsuits in three states, as well as a scathing report by Washington regulators saying the company uses complex wording in its contracts to manipulate borrowers into paying interest rates that far exceed industry norms.