Contact: Lori Sitler

Phone: (302) 577-8314

Pager: (302) 247-1132

Date: October 11, 2002

(Wilmington, DE): Attorney General M. Jane Brady and Bank Commissioner Robert A. Glen, today announced a settlement that will set new standards for the lending industry. Mortgage lender Household Finance Corp. has agreed with state government regulators to change its lending practices. Household also agreed to pay up to $484 million to consumers nationally and over $2 million to Delaware consumers for alleged unfair and deceptive lending practices in the "sub-prime" market. The settlement includes Household International, Inc. (the parent company), Household Finance Corp., Household Realty Corp., and Beneficial Finance Corp. Household is based in Prospect Heights, Illinois.

"This is a tremendous victory on behalf of those, mostly poor borrowers who have need of access to loans, but deserve fair and equitable terms," said Brady. "I believe this landmark

agreement will lead to industry-wide improvements in consumer protection."

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The multi-state investigation by state Attorneys General and banking and financial regulators alleged that Household violated state laws by misrepresenting loan terms and failing to

disclose material information to borrowers. Consumers complained that Household charged higher interest rates than promised, charged costly prepayment penalties, or deceived consumers about insurance policies. Officials said Household cooperated in the case when the states presented their concerns. The company worked quickly with the multi-state group -- over a period of about four months -- to develop and negotiate solutions to the troublesome practices identified by the states.

Bank Commissioner, Robert A. Glen commented, "Household should be commended for working to adopt innovative new programs to strengthen compliance and improve disclosure. We anticipate that this landmark agreement with Household will set a new standard for the entire sub-prime lending business."

Under the settlement, Household agreed to:

• Pay up to $484 million in restitution to consumers nationwide, depending on how many states participate.
• Limit prepayment penalties on current and future home loans to only the first two years of a loan.
• Ensure that new home loans actually provide a benefit to consumers prior to making the loans.
• Limit up-front points and origination fees to 5%.
• Reform and improve disclosures to consumers.
• Reimburse states to cover the costs of the investigations into Household's practices.
• Eliminate "piggyback" second mortgages.

Primary investigative work upon which the case was based was done by the financial regulatory departments and attorney general offices of the states of Washington, New York, Minnesota, and Idaho. State officials said the settlement resulted from a crucial and unique partnership between state financial regulators and state attorney general offices.

Iowa Attorney General Tom Miller, Washington State Attorney General Christine O. Gregoire, North Carolina Attorney General Roy Cooper, and New York State Superintendent of Banks Elizabeth McCaul led the final negotiations resulting in the settlement. Miller is the lead attorney general in the Household case and is chair of the Sub-prime Lending Committee of the National Association of Attorneys General (NAAG). Cooper is chair of the Consumer Protection Committee of NAAG. The working group of assistant attorneys general and financial regulators was coordinated by Assistant Attorney General Sandra Kane of Arizona.

Lending practices varied significantly from state to state and therefore, each state will design its own restitution plan. The details of the settlement and the process by which consumers

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can apply for restitution in Delaware are being finalized and will be announced at a later date. "We are going to review the loans which originated in Delaware to determine what, if any, patterns we observe, and then determine the most appropriate criteria and plan to assure consumers get restitution," said Brady. As information becomes available, it will be posted on the Attorney General's office website, attorneygeneral.delaware.gov.

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