Lawsuit Accuses Household of Racketeering
Tennessee couple’s lawsuit based on business loan October 27, 2004 By PATRICK CROWLEY |
Household International spent almost half a billion dollars in 2002 to settle claims with regulators and prosecutors in all 50 states that it mislead subprime borrowers over loan costs, fees and other expenses.The subprime lender, which paid $6.5 million in Tennessee to settle those earlier claims, is now being accused in a federal lawsuit filed in Nashville of racketeering.
Billy and Angela Suddarth have filed a suit in U.S. District Court in the Middle District of Tennessee in Nashville that accuses Household of violating Racketeer Influenced and Corrupt Organization statues, or RICO, the federal laws prosecutors typically use to go after mobsters and sophisticated street gangs. But the Suddarth’s, who were not part of the original settlement, claim Household’s established “a pattern of racketeering activity” in defrauding borrowers by not fully disclosing information about loan fees, insurance costs, payment requirements and terms and more. “In the course of its dealings with consumers,” the suit alleges, “(Household) committed deceptive and unfair acts, or made material misrepresentations or omissions.” Household did not return phone calls to comment. The lawsuit seeks unspecified damages. RICO suits have been used to recover economic damages brought about through fraud. According to the suit, the Suddarths were not a part of the original settlement. But they are seeking damages because they had purchased a business that had been financed by Household. The allegations against Household include withholding information that required borrowers to eventually make a large balloon payment; misleading customers about the presence of prepayment penalties on their loans; and structuring loans so that shortfalls in interest payments would occur even when the payments were made on time. “Such shortfalls could occur when payments were not late,” the Suddarths said in their suit. “(Household) further made representations concerning the opportunity to ‘skip a payment’ without informing customers that doing so would result in ‘interest short’ situations.” Household is also accused of “insurance packing,” or “misleading consumers as to the voluntary nature of (loan) insurance, the price of the insurance and the benefits and/or term of the insurance.” Two years ago Household paid $484 million to settle claims in all 50 states. “The settlement resolved a multi-state investigation that alleges Household violated state laws by misrepresenting loan terms and failing to disclose key information to borrowers such as loan costs and insurance premiums” between 1999 and 2002, according to a statement from the Tennessee Department of Financial Institutions. Related: Lender to Pay Monumental Settlement |
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