First published Oct. 11, 2002:
Washington Attorney General Christine Gregoire may announce a deal today between the state and Household International, the nationwide lending giant accused of widespread deceptive lending practices in a state agency's investigative report.
On Thursday, Gregoire's office issued an advisory saying she would announce "a major settlement affecting consumers" at news conferences today in Seattle and Bellingham. The advisory did not name any company, and Gregoire spokesman Chris Jarvis said he could not provide further details.
But Howard Mason, a financial analyst with Sanford C. Bernstein & Co. in New York, said the news is already all over Wall Street: Household International has agreed to pay $480 million to settle complaints against the firm in Washington and a number of other states.
Sign Up and Save
Get six months of free digital access to The Bellingham Herald
The settlement includes $90 million to California, officials there said Thursday.
Jarvis would not confirm or deny the $480 million figure.
Because Household has been shadowed by the uncertainty of its potential liability, its stock price has been depressed for months. On Thursday, Mason said, as news of the settlement leaked out, Household's shares shot up 25 percent, from $20.65 to $26.30, because investors believe Household is big enough to afford the settlement without permanent financial damage.
Weeks ago, another financial analyst who asked not to be identified told The Herald that Household's stock would "shoot up like a rocket" if the company managed to settle its legal problems for anything under $1 billion.
The company reported net income of $1.9 billion last year.
Any deal between the state and Household would be of special interest to dozens of Whatcom County homeowners who claim they refinanced their home mortgages with Household at higher rates because they were misled by the company's sales people. They also claim that excessive loan fees and life insurance premiums inflated the cost of their loans, and that they were trapped in those loans by high prepayment penalties.
Chuck Cross, enforcement chief at the state Department of Financial Institutions, conducted an investigation of complaints against Household from Whatcom County and many other places around the state. His strongly worded report accused the company of "intentional deception" of borrowers.
Household later hired former Gov. Booth Gardner as its liaison to state regulators, as settlement negotiations went on behind the scenes.
If the Wall Street rumors of a $480 million settlement prove accurate, the deal would likely be a record breaker. In September, the Federal Trade Commission announced a $215 million settlement with Citigroup to deal with predatory lending complaints against that company's Associates First Capital Corp. subsidiary. The FTC said that was the largest consumer protection settlement in the federal agency's history.
Disgruntled Household customers in Whatcom County and around the state have hired Wenatchee attorney Bob Parlette to pursue a class-action lawsuit against the company. It was not immediately clear what effect a state settlement would have on that lawsuit, or on other class-action lawsuits brought in other states by the American Association of Retired Persons and the Association of Community Organizations for Reform Now.
On Wednesday, Parlette said he had not been a party to negotiations between the state and the company.