Letter to William Aldinger from shareholders, indicating they thought there was a problem. This was written before the $484 million settlement on 11 October 2002
Mr. William F. Aldinger
Chairman and CEO
Household International
2700 Sanders Road
Prospect Heights, IL 60070
Dear Mr. Aldinger,
As a Household International shareholder, I am concerned about the company’s continuing controversies involving predatory lending practices, including regulatory actions and large lawsuits. It is clear that many states and municipalities will adopt stricter regulation of the sub-prime lending industry. Rather than devoting its energy to fighting increased regulation, I would like Household to become a leader in ending such lending policies.
Household’s recent update of its Best Practices for Lending demonstrates the company is willing to be a leader in establishing caps on fees paid by sub-prime borrowers. But in many other areas, much more work remains to be done.
In a climate of increased concern about the transparency of corporate practices, I hope Household will consider publishing progress reports on:
1) The company’s progress toward eliminating the sale of single premium credit insurance.
2) The company’s lobbying positions on bills regulating the sub-prime industry, including supporting legislation that caps loan origination fees and mortgage broker fees, and is therefore consistent with the company’s Best Practices Statement.
3) Efforts to respond to predatory lending complaints, including remedies undertaken when abuses are discovered.
4) Programs to protect consumers whose credit may qualify them for lower-cost financing.
In addition, I hope that Household will become a leader in ending mandatory arbitration clauses as a loan condition. These clauses strip customers of their full legal rights and seem to be in place simply to protect our company from liabilities pertaining to class action lawsuits.
Household could also demonstrate leadership by eliminating prepayment penalties on sub-prime mortgage loans. Prepayment penalties, once common on conventional mortgage loans, have now all but disappeared from that market. Our customers already pay a higher rate of interest to offset their increased credit risk, yet are not afforded the same ability to refinance during periods of declining interest rates, as their more credit-worthy neighbors are.
I will be supporting the shareholder proposal at this year’s annual meeting, asking the company to link a portion of its CEO pay to success in addressing predatory lending controversies.
Sincerely,
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