Pennsylvania Attorney General Mike Fisher announced that a letter from his office and release form will be mailed to 49,000 Pennsylvanians eligible for nearly $30 million in restitution following a landmark legal action against Household International. Consumers must fill out, sign and send back each release form in the pre-paid return envelope to the Settlement Administrator by Oct. 14, 2003 to receive restitution funds.
Fisher said the nearly $30 million for Pennsylvania consumers was the result of a December 2002 multi-state lawsuit and settlement agreement that reportedly accused Beneficial Finance Corp., Household Realty Corp., Household Finance Corp. and parent company Household International Inc. of using unfair and deceptive mortgage lending practices for real estate secured loans between Jan. 1, 1999 and Sept. 30, 2002.
The suit alleged that Household misled consumers about their bimonthly E-Z Pay plan as well as other loan terms, such as prepayment penalties and single premium credit insurance. Other allegations included claims of equity stripping and improperly charging loan points and origination fees.
The $484 million agreement was reached with Pennsylvania, 49 other states, the District of Columbia and banking regulators. The monetary settlement was the largest ever obtained by state Attorneys General in a consumer protection case.
“This is the largest restitution notification mailing involving my Bureau of Consumer Protection and the most crucial phase of our case,” Fisher said. “I urge consumers to keep an eye out for my letter and release form in next week’s mail to ensure that those who choose to participate will receive their portion of the nearly $30 million available. This will be the final notification that consumers receive and I want those eligible for the funds to know that they have an opportunity to get their share.”
Fisher said the release form will include the dollar amount that each consumer is eligible to receive if they agree to the restitution terms, sign and return the form. In some cases, consumers will receive a release form for each loan. Settlement participants will be entitled to more than the dollar amount listed if fewer than expected forms are returned to the Settlement Administrator. The restitution amount for each consumer was determined by calculating the size of the loan and the type of harm incurred.
“In other words, those with the largest loans who were also victims of multiple violations as alleged, deserve and will receive more money,” Fisher said. “This method not only makes sense, but treats consumers as equitably as possible.”
Fisher said, “In addition to the unprecedented restitution, the settlement also immediately places restrictions on the way the defendant does business.”
Some of those changes include requirements that the defendant:
— Reform and improve loan disclosures to ensure that all key terms are
clear and concise.
— Disclose full and accurate information regarding the consumers’
payment obligation at the end of the loan.
— Fully disclose insurance options to consumers.
— Offer and disclose to consumers loans with or without prepayment
— Limit the prepayment penalties to only the first two years of a loan.
— Ensure that new loans provide a benefit to consumers prior to making
— Cap loan origination fees and points at five percent.
— Provide an “independent closer” or other type of control mechanism to
manage the loan closing process.
— Provide consumers with addresses and telephone numbers of Spanish
branch offices with Spanish certified loan offices.
— Train employees regarding the terms and provisions of the agreement.
— Agree to compliance monitoring.
Those who participate in the settlement must fill out, sign and send back the release forms in the pre-paid return envelope before Oct. 14, 2003. Consumers should not return the release forms to Fisher’s Office. Settlement fund checks will be sent directly to participating consumers before the end of the year. Those who do not wish to participate in the settlement are not required to return the form and will be automatically excluded.
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