Household International Sued
An advocacy group for poor and minority consumers filed a lawsuit Wednesday accusing Household International Corp. of systematically cheating thousands of California residents who took out loans with the company.
The suit, filed in Alameda County Superior Court, said the company and two units routinely roped customers into consolidating their home mortgages and other debts, taking out loans they would have great difficulty repaying because of high interest rates, penalties and other conditions.
The lawsuit seeks to invalidate as much as $2 billion in loans issued to tens of thousands of borrowers in the last four years by Household, parent of the Beneficial and Household finance companies. The suit, which seeks class-action status, was filed by the Assn. of Community Organizations for Reform Now, or ACORN.
Household, which earned $1.9 billion last year on nearly $12 billion in revenue, is one of the biggest lenders to consumers with poor credit or scanty credit histories--so-called sub-prime borrowers described by activists as typically unsophisticated, stressed-out financially and vulnerable to unethical lenders.
Megan Hayden, a spokeswoman for Household, based in Prospect Heights, Ill., said she had not read the lawsuit but was skeptical of the claims. She said ACORN has been involved in earlier complaints about Household that were “factually misleading” and did not result in lawsuits.
“We look forward to a fair hearing on this complaint so we can focus on the facts rather than rhetoric,” Hayden said.
The lawsuit is the latest in a series of high-profile attacks against what consumer advocates say are the predatory lending practices of some sub-prime lenders.
The Los Angeles area has become fertile territory for such companies because of its multitude of low- and moderate-income families, often minorities, said Peter Kuhns, head organizer for ACORN’s Los Angeles office. He said his office receives more complaints about Household than any other lender.
Household is facing a similar lawsuit in New York state court filed by AARP.
In California last month, Household agreed to pay about $12 million to settle state regulators’ allegations that it routinely overcharged residents on loans of $2,500 or less. The Department of Corporations had filed a lawsuit alleging a “pervasive pattern of abusive lending practices” by Household and Beneficial.
The ACORN lawsuit asks that the debt-consolidation loans be rescinded and that interest, fees and profit gained as a result of unfair, unlawful or deceptive advertising be returned to borrowers. It also seeks punitive damages.
Borrowers Julio and Irene Reyes of Bakersfield and Suzanne Alexander of Orangeville, Calif., also are named as plaintiffs in the suit.
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Times staff writer E. Scott Reckard contributed to this report.
