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News Release: 01-19

GRAY DAVIS, Governor
Date: 11/14/01

DEMETRIOS A. BOUTRIS, Commissioner

Department of Corporations Seeks $8.5 Million Penalty for Predatory Practices

Household and Beneficial Cited for Thousands of Lending Law Violations

 

Sacramento, November 14, 2001 — The Davis Administration today announced that the Department of Corporations has filed suit in the Superior Court of Los Angeles County for civil penalties in the amount of $8.5 million against Household Finance Corporation and its sister corporation, Beneficial, Inc., as a result of numerous violations of the laws and regulations intended to protect California loan consumers.

"Three years ago, the Department of Corporations directed Household Finance to stop charging excessive administrative fees to its borrowers," said Commissioner Demetrios A. Boutris. "Not only did Household fail to comply, but it began practicing even more abusive lending procedures and passed these practices on to its sister corporation, Beneficial, Inc. As a result, many African-Americans, Latinos and other economically disadvantaged Californians found themselves illegally nickeled and dimed by a $26 billion company. This enforcement action demonstrates our commitment to creating a marketplace free of predatory finance, lending and investment practices."

To date, Household and Beneficial have admitted about 36,000 instances in which they have violated one of California's lending laws or regulations. Furthermore, the Department discovered 1,921 incidents of charging excessive administrative fees, the same category of violations that Household was required to correct in 1998. The newer violations included charging more than one administrative fee a year, charging excessive late fees, failing to recast loans that were paid off before the due date and charging excessive prepayment penalties.

The Department of Corporations is California's Investment and Financing Authority, reporting to the Business, Transportation and Housing Agency and the Governor. The Department is responsible for the regulation, enforcement and licensing of securities, franchises, off-exchange commodities, investment and financial services, independent escrows, consumer and commercial finance lending and residential mortgage lending. For further information or to obtain a complaint form, see the Department's Web site at www.corp.ca.gov.

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