Borrowers: Household misled us Lender denies suit's allegations By Melissa Allison Tribune staff reporter Published May 3, 2002 An advocacy group for low-income homeowners filed a lawsuit Thursday accusing Household International Inc. of systematically misleading borrowers about the interest rates, fees and other terms of their mortgage loans. The suit was filed on behalf of five borrowers, including Murelin and James Bell of Chicago, and seeks class-action status to include all borrowers nationwide who took out secured loans from Household or its business units, Household Finance and Beneficial, to consolidate debt. Although the lawsuit designates no time period, the advocacy group, Acorn, conservatively estimates that Household made more than $45 billion in such loans to at least 175,000 borrowers over the past three years. Household quickly denied that it misleads customers. As the nation's largest independent consumer-finance company, Prospect Heights-based Household has become a lightning rod for consumer activists combating so-called predatory lending, a term that describes many types of allegedly deceptive mortgage lending. Over the past two years, since Citigroup purchased Household's bigger rival, Associates First Capital Corp., and promised to strengthen its consumer safeguards, Household has seen a flurry of lawsuits and complaints about its practices. Earlier this year, Household agreed to pay $12 million to settle a lawsuit from California regulators claiming the company intentionally bilked customers by overcharging on some fees. Household blamed technological problems. Acorn also has filed a lawsuit in California seeking class-action status for Household borrowers there. Household specializes in lending to people with spotty credit records, an industry that accepts more risk from borrowers and therefore charges higher interest rates than conventional lenders. As they attempt to curb predatory lending practices, lawmakers, regulators and others have had trouble agreeing on where the line lies between trying to stop predatory practices while not curtailing acceptable lending to people with poor credit. Generally, predatory lending includes mortgage lending practices that harm borrowers by charging onerous interest rates, lending people more than they can repay and tacking on unnecessary fees. As more attention has been focused on predatory lending, Household has taken several steps to upgrade the practices of its subprime lending operations and reduce some costs. In response to the latest suit, Household denied that it misleads customers. "Acorn continues to launch baseless accusations and lawsuits rather than work to enact real solutions to help eliminate predatory lending from the marketplace," the lender's statement said. The Illinois lawsuit seeks to invalidate the terms of the named plaintiffs' loans, allow all class members to rescind their loan transactions, and extract actual and punitive damages, although no dollar amount is specified in the lawsuit. At an Acorn news conference in Chicago on Thursday, Murelin Bell, who in 1999 consolidated her old mortgage and other debt into a loan from Household, said she has made all her payments. "It's been a struggle," she said. "And it's been no thanks to Household." Bell said she had to battle Household to remove credit life insurance from her loan, and has been denied refinancing opportunities from other lenders because of the difficult financial situation the Household loan has caused. Household said it reviewed the loan to Bell and her husband and found "this loan is sound and provided real, tangible benefits to these customers." Household spokeswoman Megan Hayden said the terms of the loan were made clear. "Everything was clearly disclosed to the Bells, signed for and dated," she said. Copyright © 2002, Chicago Tribune
