COLUMBUS – Ohio consumers will receive approximately $30 million dollars in restitution from a landmark settlement announced today by the Ohio Department of Commerce and Ohio Attorney General Betty D. Montgomery. The settlement with Household Finance is in connection with alleged unfair and deceptive lending practices in the subprime mortgage market.

"The Household settlement corrects lending abuses and sets standards for the home lending industry. It is a step forward in curbing abusive lending practices and ensuring

that the American dream of home ownership does not become a homeowner’s worst nightmare," said F. Scott O’Donnell, Ohio’s Superintendent of Financial Institutions.

"This settlement provides relief to Ohio consumers and addresses practices in the lending industry that we will continue to monitor," Attorney General Montgomery said. "We must be vigilant to ensure consumers are getting all the information they need to make informed choices that affect the most important purchase many will ever make."

The settlement impacts more than 20,000 Ohio consumers who received real estate loans with Household beginning in 1999 -- the year the alleged unfair and deceptive lending practices began.

Details of the settlement and the process by which consumers can apply for restitution are being finalized and will be announced at a later date.

As part of the settlement, Household and its affiliates Household Finance Corp., Household Realty Corp. and Beneficial Finance Company agreed to pay up to $484 million to consumers nationally, depending on how many states participate.

This settlement is the largest ever against a mortgage lender, more than doubling the $215 million settlement that Citigroup, Inc. agreed to pay in September to settle with the Federal Trade Commission due to allegations of deceptive marketing and lending practices.

Ohio, 18 other states, and the District of Columbia began coordinating their efforts last spring after identifying a pattern of complaints from borrowers who said they had been misled into agreeing to home loans with different and more expensive terms than had been promised.

The multi-state investigation alleged that Household violated numerous provisions of various states’ consumer protection acts and mortgage loan laws and regulations by misrepresenting loan terms and failing to disclose material information to borrowers.

Regulators claim that Household failed to properly inform consumers of their loan costs and fees, including the cost of insurance premiums, prior to settlement. In other cases, borrowers who were led to believe they would receive interest rates of about seven percent were actually charged annual percentage rates of 12 or more percent. This allegedly occurred in situations where Household marketed its "E-Z pay" plan. Under the plan, consumers made loan payments every two weeks instead of once a month. Such payment schedules reduce the total amount of interest paid over the life of a loan, but investigators believe Household misrepresented those savings as lower interest rates.

Under the settlement, Household agreed to:

• Pay up to $484 million in restitution to consumers nationwide, depending on how many states participate.
• Limit prepayment penalties on current and future loans to the first two years of a loan.
• Ensure that loans in certain refinancing situations actually provide a net benefit to consumers prior to making the loan.
• Limit up-front points and origination fees to 5%.
• Reform and improve disclosures to consumers, including providing interest rate and points options at earliest possible date and providing comparisons that include taxes and insurance.
• Reimburse states up to $200,000 each to cover the costs of the investigations into Household’s practices.

"We appreciate Household’s cooperation in resolving this matter to the benefit of consumers in Ohio and nationwide," Superintendent O’Donnell said.