(Atlanta -- October 11, 2002) Attorney General Thurbert Baker announced a landmark consumer settlement today with mortgage lender Household Finance over its lending practices in the "subprime" market for home loans. Household agreed to pay up to $484 million to consumers nationally and over $9 million to Georgia consumers for alleged unfair and deceptive lending practices in the "subprime" market. The restitution amount is the largest ever in a state or federal consumer case.

The multi-state investigation by the National Association of Attorneys General alleged that Household violated state laws by misrepresenting loan terms and failing to disclose material information to borrowers. Consumers complained that Household charged far higher interest rates than promised, charged costly prepayment penalties, or deceived them about insurance policies.

In announcing the settlement, Attorney General Baker stated, "Georgia consumers have demanded reform in the mortgage lending industry. Loan disclosures should be clear, accurate and straight-forward, and Georgians should only be charged the interest rate they were promised when they signed up for the loan. Today's settlement represents an agreement by Household Finance to do just that. Today's settlement also sends a strong message to every lender in Georgia that they must comply with the safeguards for Georgia citizens in our new predatory lending law."

Household cooperated with the investigation once it was confronted by the states' evidence and concerns. The company worked with the nation's attorneys general over a four month period to develop and negotiate solutions to the illegal practices identified by the states. The settlement, which includes Household Finance Corp., Household Realty Corp., and Beneficial Finance Corp., provides nationwide relief to consumers and addresses practices in the lending industry that have been a priority effort for Georgia's consumer protection and banking regulators. The Georgia Department of Banking and Finance and the Governor's Office of Consumer Affairs both joined with Attorney General Baker in reaching this settlement.

Under the settlement, Georgia consumers could receive up to $9,147,000.00 in total restitution. Over 15,000 Georgia consumers have taken out real estate loans with Household since 1999, the year the problem practices began.

In many cases, Household failed to properly inform consumers of loan costs and insurance premiums that were included in their loans. In other cases, borrowers who were led to believe they were receiving interest rates of about seven or eight percent were actually charged nearly twice that much. Borrowers also complained that they were charged costly prepayment penalties that were not clearly disclosed to them.

Under the settlement, Household agreed to:

- Pay up to $484 million in restitution to consumers nationwide

- Limit penalties for prepayment of both existing and new loans to the first two years of the loan

- Determine that a new loan is actually providing a benefit to the consumer prior to refinancing an existing loan

- Limit up-front points and origination fees to 5% of the loan amount

- Reform and improve disclosures provided to consumers

- Eliminate "piggyback" second mortgages where a customer enters into a transaction for 2 loans at once, with the second mortgage having substantially higher transaction fees and interest rates

- Eliminate the practice of charging points or fees if the mortgage is refinanced within 12 months

The nationwide settlement authorizes Georgia to tailor its restitution plan to the needs of Georgia consumers, and Attorney General Baker is working with the Georgia Department of Banking and Finance and the Governor's Office of Consumer Affairs to design a restitution process that will provide appropriate relief to Georgia consumers. Georgia will provide written notice to all affected Household Finance customers who are eligible for restitution once the settlement fund has been fully funded, which under the terms of the settlement should be approximately March 2003. Georgia consumers who may be eligible for restitution funds are any Household Finance customer who closed a loan with Household Finance between January 1, 1999 and September 30, 2002.