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Chicago Tribune
Nov. 17 , 2002
By David Greising

We typically feel sad when Chicago loses another corporate headquarters.

In global business, the takeover game is winner-take-all. The acquirer takes all the benefit. The acquiree gets taken. Either taken to the cleaners, taken down a notch or taken off the map.

BP wasn't going to cut jobs when it bought Amoco. In a moment of hallucination, a BP official even insisted Chicago would gain jobs. More than 4,000 pink slips later, we knew it wasn't true.

Ameritech, Quaker--the list and the losses go on.

Chicago lucked out on Bank One. Serial acquirer John McCoy of Columbus, Ohio, wanted to play in the big time when he acquired First Chicago/NBD. He moved the corporate headquarters here.

Bank One survived. McCoy didn't. Chicago got an impressive new CEO in Jamie Dimon, and the hope that Bank One might wind up the "winner" in a big deal one day.

Now Household goes. But Household isn't like most disappearing acts. The loss of its independence is sad, but more in an Andersen kind of way.

Andersen collapsed as it lost its moral compass in the quiet of the corner suites and the accountants' hushed calculations. It happened to Household at the economy's bottom rungs, where the action is rawer, more personal.

For most of a century, Household decently filled a void in the marketplace. It offered credit to the uncreditworthy. "Never borrow money needlessly, just when you must ... from one you trust," the jingle went.

Household Finance Corp. and its sister company, Beneficial, charged steep but rational prices. It aggressively made sure that customers paid.

Somewhere in the 1990s, that changed. "Borrow money needlessly" could have been the new mantra.

Household's new tactics, as laid out in lawsuits nationwide, became the very definition of predatory lending.

That's the way people like Richard Patton see it.

Patton says Household salespeople hounded him and his wife for four months after the tax record of their first home purchase was made public.

The Pattons gave in. The Southeast Side couple borrowed $123,000 in the form of a first mortgage and revolving credit line that boosted their borrowing 54 percent.

A few months later, they got a new mortgage that exceeded the home's value by 18 percent. Household charged them $7,375 for single-premium life insurance, $4,238 for disability insurance and $10,679 in other fees.

Add it up: $22,292 in transaction costs. While typical borrowers signed mortgages at 7 percent interest and no points, the Pattons paid Household 11 percent interest and deal costs amounting to 18 percent of the loan's value.

Oh yes, Household also threw in a $15,000 open-ended second mortgage charging 21 percent interest. Just in case the Pattons needed more cash.

Patton knows he borrowed too much. He signed papers he didn't understand. He says he got worn down by the sales pitches and seduced by the easy money.

The experience Patton describes fits the textbook definition of predatory lending. "They're the ringleader," says the 48-year-old paramedic. "They invented the concept."

Experiences like theirs have been repeated in hundreds of instances around the country that began to multiply in the late 1990s. Household has settled some complaints, redrawn the terms of some loans and continues to deny predatory practices in others.

The legal battles will go on for some time. A national class-action complaint is seeking certification in Cook County Circuit Court. Class-action suits have been filed in at least three other states.

Household at first tried to claim the problems were isolated incidents. Later, the company said a particularly troublesome office in Washington state was at the root of its troubles.

But before long, the company was settling complaints and paying a $484 million fine to state attorneys general nationwide. It still is preparing to defend the class actions.

Household was insisting, in hearing after hearing, that it was not a predatory lender. Much like Richard Nixon saying he was not a crook.

Chicago has lost another headquarters. But given what Household became, this one doesn't hurt quite so much.

This is just one of our articles referencing HSBC complaints about mortgages, Bestbuy, credit cards, auto loans, fees, and late payment processing.

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HSBC Watch monitors HSBC customer trends for possible violations of Regulation Z and other possible illegal actions. We use your individual HSBC complaints and merchant complaint reports to perform trend analysis. We are not associated with HSBC, Household International, or their merchants. Some items are used by permission granted in the Fair Use guidelines of the 1976 U.S. Copyright Act. HSBC Watch was formerly known as Household Watch is now part of the Lender Watch network


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