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News Release: 01-01

GRAY DAVIS, Governor
Date: 01/11/02

DEMETRIOS A. BOUTRIS, Commissioner

Davis Administration Secures Over $3 Million in Refunds for Consumers

Household and Beneficial to Pay Additional $8.9 Million to the Department of Corporations

 

Sacramento, January 11, 2002 — The Davis Administration today announced that Household Finance Corporation and Beneficial California, Inc., have agreed to refund $3 million to California consumers, pay $8.9 million to the Department of Corporations and affect significant changes in their lending practices to settle the predatory practices lawsuit filed by the Department in November. The Governor's Budget commits $10 million to educate the public on how to avoid these predatory practices.

"This settlement shows that the Davis Adminstration is committed to making sure that every consumer in California gets fair treatment," said Business, Transportation and Housing Secretary Maria Contreras-Sweet.

"Every consumer in California who has been overcharged by Household and Beneficial since Gray Davis became Governor will be made whole," said California Corporations Commissioner Demetrios A. Boutris. "African-Americans, Latinos and other economically disadvantaged populations often do not have the same access to credit that other more fortunate consumers enjoy and therefore turn to sub-prime lenders like those operated by Household International.

As a result of the independent audit requested by the Department, Household and Beneficial have admitted about 60,000 instances in which they have violated one of California's lending laws or regulations - 24,000 more violations than the 36,000 that were initially reported in Household's self-audit. Since these violations were first brought to Household's attention in 1998 but the practices continued on through 2001, the settlement mandates the following terms:

  1. Household/Beneficial must refund customers for any additional violations identified by the independent audit. The Department had previously required Household/Beneficial to refund the loan customers identified in the initial 36,000 violations.
  2. Household/Beneficial must pay $8.9 million plus an additional amount for any unanticipated violations identified in the independent audit.
  3. Household/Beneficial must fix their systems to prevent future violations.
  4. Household/Beneficial must provide the Department with access in California to all documents relating to all California loans.
  5. Household/Beneficial must comply with independent audits for an additional two years. All audits will be tested and confirmed by the Department.

In order to give African-Americans, Latinos and seniors the knowledge necessary to protect their financial security and open the door to economic opportunity through prudent saving and investment techniques, the Governor's Budget for 2002-2003 includes a $10 million public education campaign called STOPP (STatewide Outreach on Predatory Practices).

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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