The California Department of Corporations (Department) is seeking $8.5 million in civil penalties from Household International subsidiaries Household Finance Corporation and Beneficial, Inc., as a result of alleged violations of the state’s laws and regulations. According to a recent announcement, the Department — which is responsible for the regulation, enforcement and licensing of some of the state’s residential mortgage companies — filed suit in the Los Angeles County Superior Court.
Household “vehemently denies any assertion that it has willfully violated the lending laws that regulate its business.” In response to the lawsuit, the company issued a statement that said, “during a routine examination by the Department of Corporations in 2000 it was discovered that some HFC and Beneficial customers were being overcharged on certain fees.” The statement went on to say that following the review, the company promptly issued a full refund to affected California customers, and that it was commended by the Department in June for doing so.
The Department said that to date, Household has “admitted about 36,000 instances in which” it has violated California’s lending laws or regulations. The announcement quoted the Department’s Commissioner, Demetrios A. Boutris, as saying, “many African-Americans, Latinos and other economically disadvantaged Californians found themselves illegally nickeled and dimed by a $26 billion company.”
Household responded that it “is extremely surprised by the Department’s recent actions, especially its assumption that ethnic minorities were disadvantaged as a result of these overcharges. In accordance with all fair lending laws, lenders cannot collect ethnic or racial data on loans of this type, thus the Department’s assertion cannot be based on fact.”
In September, the Association of Community Organizations for Reform Now (ACORN) released ‘The Great Divide’, an analysis of racial and economic disparities in home purchase mortgage lending nationally and in sixty metropolitan areas. In that report — derived from Home Mortgage Disclosure Act, or HMDA data — ACORN pointed out that minorities have seen most of the growth in subprime lending.
A constant critic of Household, ACORN recently blasted Household for its attempts to promote financial literacy teaching what Household called “key financial lessons” to consumers in Arizona and Ohio. ACORN called Household’s efforts “like the sharks educating the fish on how to avoid being eaten!”
Stephen M. Dane, an Ohio fair housing attorney with the lawfirm of Cooper & Walinski LPA, told MortgageDaily.com that clients have come to his firm who closed loans with Household but were not provided with proper disclosures about loan terms. In some cases, he said the borrowers received no disclosures at all until they showed up at closing. “Household took advantage of several borrowers who did not understand what they were signing, and in several cases has misrepresented the terms of the loans to the borrowers at closing.”
