August 7, 2003
Office of Financial and Insurance Services (OFIS) Commissioner Linda A.
Watters announced today that Michigan consumers who had home loans with
Household or Beneficial Finance will be able to claim settlement payments
beginning this week. Notices are being sent to approximately 19,000 Michigan
Household/Beneficial borrowers notifying them of their eligibility to
share in the state's $15.7 million settlement with Household International.
"We negotiated a strong settlement with Household,
and we are even more pleased to see money flowing back to deserving Michigan
consumers who were harmed by Householdn's predatory lending practices,"
Under the settlement distribution plan, all Household/Beneficial
borrowers who obtained a mortgage loan directly from Household/Beneficial
from January 1999 through September 2002 will be sent forms to claim their
Michigan's settlement distribution plan provides for payments
to all Household/Beneficial borrowers who were subject to specific unfair
lending practices, including excessive loan points, prepayment penalties,
and credit insurance "packing." The size of the individual payment
is a factor of the type of harm identified combined with a weighting factor.
The consumer payment program stems from the landmark settlement
between Household/Beneficial International and the Office of Financial
and Insurance Services and the Attorneys General of all 50 states and
the District of Columbia. Household International, through its subsidiaries
Household and Beneficial Finance, is one of the nation's largest sub-prime
mortgage lenders. The settlement resolved an investigation by the states
into allegations of unfair and deceptive mortgage lending practices by
Household/Beneficial. The states alleged that Household/Beneficial had
overcharged borrowers with fees and interest, and had misled borrowers
about other loan terms such as prepayment penalties and credit insurance.
Under the settlement, which was finalized in December 2002,
Household/Beneficial agreed to pay $484 million dollars to the states
for distribution to eligible Household/Beneficial borrowers. The monetary
settlement was the largest ever obtained in a consumer protection case.
As part of the settlement, Household/Beneficial also agreed
to implement a series of reforms in its lending operations. Court injunctions
in all 50 states restrict prepayment penalties on current and future home
loans, limit up-front points and origination fees, and improve loan disclosures.
All Household/Beneficial customers who are eligible to receive
a settlement payment should receive a notice in the mail from the settlement
administrator within the next week. Consumers who wish to participate
in the settlement will have to complete and return a simple claim and
release form. The actual settlement payments will be paid directly to
the consumers by check before the end of the year.
Household/Beneficial mortgage loan customers who have questions
about the settlement payment procedures should call toll-free 1-888-780-2156.
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The Michigan Office of Financial and
Insurance Services (OFIS) is responsible for the regulation of Blue Cross
Blue Shield, 31 HMOs, 143 banks, 275 credit unions, almost 1,500 insurance
companies, 1,583 investment advisers, 2,164 securities broker-dealers,
6,000 consumer finance lenders, 105,000 insurance agents, and 120,715
OFIS is part of the Department of
Consumer and Industry Services and is primarily fee-funded, requiring
minimal public tax dollars for its regulatory and consumer assistance
activities. OFIS has insurance, financial institutions and securities
information available online at the OFIS web site, www.michigan.gov/ofis,
or at the Michigan government home page, www.michigan.gov.
All information is also available through the OFIS toll free number, 877-999-6442.
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