For Immediate Release
December
16, 2003
MADIGAN AND DFI ANNOUNCE PAY DAY ON HOUSEHOLD-BENEFICIAL SETTLEMENT FOR PREDATORY LENDING
Chicago – Attorney General Lisa Madigan and Director of Financial Institutions Roxanne Nava today announced that checks are in the mail for Illinois consumers expecting to receive payment from the landmark settlement with Household-Beneficial Finance reached last October.
More than 7,000 Illinois homeowners who were alleged to be victims of predatory loan practices by Household-Beneficial Finance between January 1999 and September 2002 will receive restitution totaling $11,227,739.66 from the Prospect Heights-based company in the upcoming weeks. 7,450 paychecks are being sent throughout Illinois this week, with the average award totaling $1,495.
The nationwide settlement, totaling $484 million, was the largest settlement ever negotiated by the nation’s attorneys general in a state or federal consumer case.
“Predatory lenders prey upon people’s dreams of owning homes, “ Madigan said. “The size of this settlement should serve as a wake-up call to companies who might engage in similar practices.”
Illinois Director of Financial Institutions Roxanne Nava said, “When Governor Blagojevich appointed me to head the agency that regulates lenders in Illinois, he made clear that our top priority must be protecting consumers from unfair business practices. Today's news should reassure consumers that the Department of Financial Institutions takes their complaints seriously and will continue working closely with Attorney General Madigan to take swift action against companies that are defrauding consumers in Illinois.”
In March 2002, Illinois was among the first states to investigate the lending practices of Household - Beneficial Finance based on allegations the companies violated state laws by misrepresenting loan terms and failing to disclose important information to borrowers.
Consumers in Illinois and other states complained that, among other things, Household-Beneficial charged higher interest rates than promised, charged excessive loan origination fees and points, and repeatedly refinanced consumers’ loans to generate an entirely new set of origination fees and charges for its benefit.
In addition to the more than $11 million in restitution, Household agreed to pay Illinois $550,000 for its costs. Additionally, the company agreed to several important reforms in its lending practices that include limiting prepayment penalties on current and future home loans to the first two years of the loan, ensuring that new loans provide an actual benefit to the borrower and limiting up-front points and origination fees to five percent.
Madigan said Household-Beneficial customers with additional questions about their settlement payment should call the settlement administrator’s toll-free number at 1-888-780-2156 or visit the administrator’s website at www.household-beneficial.com.
In the last legislative session, a number of bills were introduced aimed at the regulation of high cost payday loans. The primary issues revolved around caps on the interest rates and fees as well as limits on the number of times a loan can be renewed, or flipped. The Monsignor John Egan Campaign for Payday Loan Reform backed the Illinois Affordable Loan Act, which limits the APR on payday loans to 36 percent and restricts the number of loan roll overs to two per loan.
Madigan today offered tips to consumers tempted by the offers of payday loans, reminding consumers that there are some community banks that compete for consumer business by meeting their needs without making them pay exorbitant fees and interest rates. These banks will make short-term loans at comparatively low interest rates and they require little more paperwork than the payday lenders to get the consumer qualified for the loan. These lenders will prove to be far more affordable for the consumer when it comes to paying back the loan.
Expected to join Madigan today were William McNary, co-director of Citizen Action/Illinois; leaders of the Monsignor John Egan Coalition for Payday Reform; Anne Vanderweele, legislative liaison for Metropolitan Family Services; Marie Stevens, consumer credit counselor for Metropolitan Family Services; Steve Wrone, staff attorney for the National Center on Poverty Law; and Marva Williams, senior vice-president of the Woodstock Institute.