Notices are being sent this week to 3531 households - and consumers must file a claim-and-release form by October 14.
DES MOINES. Attorney General Tom Miller said today that over 3500 Iowa borrowers will be receiving notices in the next few days that they are eligible to share in payments totaling $1.49 million from Household International, Inc., one of the largest subprime mortgage lenders in the U.S.
The Iowa payments are part of a nationwide settlement last December of a predatory-lending case brought by Iowa and other states against Household International and its subsidiaries, Household Finance and Beneficial Finance.
Miller was the lead state attorney general in the matter, in which the states alleged Household overcharged borrowers and misled them about loan terms such as prepayment penalties, credit insurance, and interest rates. Household agreed to pay a total of $484 million to residents in all 50 states, the largest direct restitution amount ever in a state or federal consumer case.
"The predatory practices were ended by the settlement, and now we are about to distribute the monetary compensation," Miller said. "I urge Household customers to watch for the notice coming in the mail and take the necessary steps to receive payment." Consumers who wish to participate in the settlement payments will have to complete and return a simple claim and release form no later than October 14.
Miller said payments will range from a $100 minimum to about $5400, depending on the borrower's specific loan situation and factors such as credit insurance, points, prepaid penalties, loan-to-value ratio, and the size of their loan. Payments are expected to be processed and paid directly to consumers by check by about the end of the year.
Miller said the notice being sent to individual consumers by the Household Settlement Administrator will state the minimum payment the consumer would receive, such as $420 - but a consumer's payment could be higher if others do not submit the waiver and claim by October 14. The share of those who don't participate goes back into the "kitty" to be redistributed to others who file claims.
"Under this settlement, Household has changed the way it does business," Miller said. "That's crucial. This is a major blow for fairness in the marketplace, especially for lower-income Iowans involved in the paramount goal of home ownership. It gives consumers a much better opportunity to get credit on fair terms."
As part of the settlement, Household agreed to implement a series of reforms in its lending operations. Court injunctions in place in Iowa and all 50 states restrict prepayment penalties on loans, prohibit loan "flipping" (a practice that strips equity from people's homes and can lead to loans that exceed the value of a home), limit up-front points and origination fees, and improve loan disclosures.
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