Story originally from GULP Press Release

For immediate release: Wednesday, August 27, 2003

For further information contact:
Michael Hanley (585) 295-5723

A legal advocacy organization familiar with the huge settlement negotiated by the state Attorney General’s office concerning lending practices of Household International says that it is crucial that borrowers eligible for a payment under the settlement consult an attorney before they agree to accept the offer. According to the Greater Upstate Law Project, Inc., in order to receive a payment, borrowers are required to sign a release of nearly all of their legal claims against Household. That means the mortgages that they now have with Household will stay in place -- sometimes for another 25 years or longer. That could expose borrowers to extra charges that could easily run into tens of thousands of dollars, or even much more.

The Greater Upstate Law Project, Inc., a not-for-profit public interest law firm which has offices in Albany, Rochester, and White Plains says that it may not make much sense to accept a payment of around $1,500 to $3,000 if doing so means that you give up your right to go to court to get out of a mortgage that in some cases will leave a borrower liable to pay $100,000 or more in improper extra charges over the length of a mortgage. "Anyone who receives one of these settlement letters needs to see an attorney before they sign away their rights. They need to stop, take a breath, and get good legal advice," says Ruhi Maker an attorney with GULP’s affiliated office, the Public Interest Law Office of Rochester. "There’s no rush to do anything since borrowers have until October 14 to act. While it would be tempting to just send the paperwork back right away to accept the payment, that could be the worst decision a borrower might make."

The settlement was announced by the New York State Attorney General’s Office and the state Banking Department in December 2002. Since August 15 notices have been sent to all of the approximately 25,000 borrowers affected by the settlement. Those who receive notice of the settlement have until the October 14 deadline to let the Household beneficial national administrator know whether or not they want to accept the payment and release their individual claims against Household International.

New York, along with all other states and the District of Columbia, had charged Household International, the parent company of Household Finance and Beneficial Finance, with illegal predatory lending practices such as charging excessive fees to write the loans, charging excessive interest rates, and mushrooming all of those charges by pushing borrowers to keep refinancing their loans (sometimes re-writing a loan several times in the course of a few weeks).

Without admitting wrongdoing, Household agreed to pay $484 million to borrowers nationally, with $37 million of that amount going to borrowers in New York State who made loans with Household or Beneficial between January 1, 1999 and September 30, 2002.

The problem is that it may be difficult for borrowers, as a practical matter, to get the legal advice they need. In the Rochester area and in the Capital District, PILOR and GULP will be able to provide limited legal assistance thanks to special projects funded by private foundations, the City of Rochester and the United Way of Greater Rochester. In certain geographic areas of the state, there may be limited assistance available, however there is no comprehensive statewide funding to handle the dramatic increase in need for legal assistance. "This is an extremely important settlement for New York’s home owners. Unfortunately New York’s legal services system is woefully under-funded, under-staffed and not able to meet the full need. We are trying our best to work with volunteer lawyers and legal services offices across the state to make sure they have the information they need to advise the borrowers they can serve," said Anne Erickson, GULP’s Executive Director. "Attorneys who need assistance should call our office." In the meantime borrowers who received a notice from the state Attorney General can call PILOR at 585-454-4060. PILOR can accept clients who are eligible under their grants for advice and possible representation, and will refer other clients to the pro bono or private bar. Borrowers may also request a fact sheet that explains why they need to see a lawyer before they sign their release of claims at 585-295-5728.

-30-

return to "what's new"