Thousands of Washington homeowners overcharged for home loans issued by Household International will share millions of dollars in one of the largest direct consumer restitution cases in U.S. history.

Attorney General Christine Gregoire said that in addition to restitution, the settlement requires the Illinois-based company, whose subsidiaries include Household Finance Corp. to change lending practices. Among the most significant requirements of the settlement is a requirement that Household and its subsidiaries ensure that consumers actually benefit – usually in lower payments or lower overall interest rates – from new loans.

Nationwide, Household will pay up to $484 million in consumer restitution – including up to approximately $20.6 million to Washington consumers – to settle a multi-state investigation into alleged predatory lending practices.

Gregoire joined officials from Arizona, Iowa, Illinois, New York and Minnesota in seeking the settlement. Final negotiations were led by Gregoire, North Carolina Attorney General Roy Cooper, Iowa Attorney General Tom Miller and New York Banking Regulator Elizabeth McCaul.

In addition to restitution for consumers, Gregoire said she hopes the settlement “will begin to clean up the unlawful, unethical, and unconscionable lending practices that occur all too often in the sub prime lending market today.”

Insurance Commissioner Kreidler is seeking a state rule that would strongly restrict the sale of credit insurance in conjunction with a mortgage loan. Under the settlement, Household is now prohibited from requiring such insurance.

“The Household settlement should send the message loud and clear to other lenders that these predatory practices won’t be tolerated. To ensure this outrageous behavior won’t be repeated, the state rule we are proposing will erase the inherent unfairness of this unsavory product once and for all,” Kreidler said.

DFI investigated Household Financial after receiving about 180 complaints against the company starting in January 1999.

Earlier this year, the companies refunded nearly $1 million to Washington borrowers after DFI uncovered overcharges under the Act.

Many consumers faced monthly loan payments that were far higher than expected and some were put at risk of losing their homes. In addition to “packing” loan insurance into the payments, Household imposed costly prepayment penalties, failed to inform consumers about finance charges, and in some cases charged 12 to 14 percent interest when a 7 percent rate had been promised.

Additional information can be obtained by calling 800-450-1003 or visiting www.dfi.wa.gov.