Boston City Councilor Charles Turner presided over Thursday’s hearing to determine if Household Finance Corp. is a predatory lender and whether the city should divest money it has invested in the company.
The Association of Community Organizations for Reform Now has vowed to stamp out predatory lending and asked a number of Boston City councilors to join their fight against accused predatory lender Household Finance Corp.
Based in Prospect Heights, Ill., the national corporation has been targeted by the ACORN for what it calls unscrupulous lending practices and bullying tactics that include preying on the less knowledgeable and performing bait-and-switch tricks with paperwork.
The Boston City Council Committee on Banking and Community Investment convened a public hearing Thursday night at Roxbury Community College to hear testimony related to HFC. The council must decide whether to pass a resolution by Councilor Charles Turner which calls on the Boston Retirement Board to divest itself of $1 million worth of investments in HFC. According to council members, a decision will not be rendered until the entire committee has had an opportunity to review the testimony, perhaps within a few weeks.
Although HFC was not represented at the hearing, Turner said a representative requested a meeting with him within the next few weeks.
Members of ACORN and residents from Brockton to Dorchester testified to numerous tales involving HFC during the hearing, although some said it was extremely embarrassing to talk about their personal finances in a public forum.
“When you’re talking about HFC, you’re talking about somebody that comes to your house and takes the money out of your pockets,” said Betty L. McGuire of 22 Fernboro St. in Dorchester, who spoke on behalf of ACORN.
McGuire said people who take out loans from HFC are usually in worse shape financially after than they are before, even when it comes to refinancings which are generally used to lower payments.
“Their standards and tricks are becoming illegal,” she said, mentioning that states such as North Carolina and Massachusetts have promulgated rules which prohibit practices that are attributed to predatory loans.
McGuire said it makes “good moral sense” for the councilors to remove the funds from HFC.
“We don’t understand, frankly, why they [ACORN] have targeted us,” said Megan Hayden, spokeswoman for HFC. “We are a company that has been in business for 125 years. You don’t stay in business that long by taking advantage of your customers,” she said during an interview with Banker & Tradesman on Friday.
Hayden said that HFC has investigated every incident of purported wrongdoing that ACORN or any other organization has brought to its attention. “At any time, if we hear about customers who are not happy, we immediately investigate. If we feel we find anything that doesn’t meet our standards, we immediately fix it,” she said.
Hayden said that ACORN has been wrong in every incidence they have complained about.
“We’ve had them give us claims of customers paying for insurance they never wanted when the customer never even had insurance,” she said, addressing one of ACORN’s complaints. ACORN has maintained that HFC often sells expensive single-premium credit insurance to customers and has examples of clients for which they obtained refunds of thousands of dollars.
“We don’t understand why they do it [target HFC]. I certainly appreciate and support their organization’s stated mission of wanting to help those out there who need the help the most. At the same time, I question their tactics to bring customer situations to the media and making them public,” she said.
‘Bad Business Strategy’
However, the testimony given by area residents is hard to ignore.
Take Doug Pendarvis, a boxing promoter who lives in Dorchester. Last year he decided to refinance his mortgage, which was at 8.7 percent interest. He chose Household, which promised him a lower monthly payment and extra money back to pay bills. Pendarvis said he has paid his bills on time every month but, close to the closing date, he was told by Household his rate would be 11.1 percent with $17,725 in fees. “Attached to this loan is a second mortgage revolving loan for $6,521, for which they charged an 18 percent interest rate and an extra $500 in fees and $50 in annual charges and a balloon payment,” he said.
Pendarvis said he “wasn’t born yesterday” but he is now paying $2,300 a month for a loan with Household totaling $250,000 despite his original mortgage payment being $1,500 a month for a total of $139,000.
“What I found out about Household is that they are full of deception and lies … People who are trained to rip you off can usually get away with it,” he said.
But Hayden said HFC is not in the business to take homes. She quoted HFC’s Massachusetts foreclosure rate of 0.21 percent. “In every instance when we have to foreclose on a home, we lose money. In fact, that dollar amount is about $25,000 [per foreclosed home]. It’s [issuing loans that lead to foreclosure] a bad business strategy,” she said.
Turner presided alone over most of the meeting because Councilors Brian Honan and Francis M. Roache were attending vigils at City Plaza in remembrance of the victims of Tuesday’s terrorist attacks. Turner heard testimony from seven individuals, including Maude Hurd, national president of ACORN.
If the resolution passes the City Council, the council will go before the Boston Retirement Board to convince board members the divestiture is warranted.
According to a letter from the retirement board’s Executive Officer Donna M. Mueller to committee Chairman Honan, the board charges investment managers with deciding which funds are the best for the city. She added that she was not aware of any investigation of HFC by state or federal officials for wrongdoing or that HFC has been found guilty of violating any consumer credit regulations. “If the committee has such information that would affect the rating of the securities, I could share it with the investment managers,” she wrote.
Turner pointed out that although there have been no judgments, HFC’s practices fit a pattern of predatory lending. The city council level of government is responsible to protect the residents of the community, said Turner. “It’s not appropriate to invest in a company whose practices fit those patterns,” he said.
