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The Honolulu Advertiser
Posted on: Tuesday, January 24, 2006

Hawai'i to see $1.5M in Ameriquest settlement

Advertiser Staff and News Services


Hawai'i customers of Ameriquest don't need to do anything at this point. They will be contacted by the state as specific recovery terms and plans are determined.

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State prosecutors yesterday hailed a $325 million settlement with lending giant Ameriquest, saying the deal will give some 725,000 borrowers in 49 states a chance at recovering some money lost because of what they described as deceptive lending practices.

Hawai'i consumers will receive about $1.5 million in restitution, while the state government is expected to receive roughly $310,000 from the settlement to pay for costs associated with the investigation according to the Department of Commerce and Consumer Affairs' Office of Consumer Protection.

"We believe Ameriquest engaged in a series of unfair and deceptive practices by using high-pressure sales tactics to boost commissions," said OCP Executive Director Stephen Levins. "This landmark settlement sets standards we expect other mortgage lenders to follow."

Under the settlement distribution plan, Hawai'i Ameriquest customers who obtained mortgages from Jan. 1, 1999, through Dec. 31, 2005, will be sent forms by the state to process their claims.

The states began investigating the Orange, Calif.-based company, which lends to people with poor credit, more than two years ago after receiving complaints from tens of thousands of consumers who claimed they were paying more for their loans than they bargained for.

The states have alleged that the company's business practices were deceptive, leaving some borrowers saddled with extra fees or higher mortgage rates.

There was "strong, strong pressure in the compensation system and in the quota system and from the branch and retail managers to sell, sell, sell," said Iowa Attorney General Tom Miller, who led the states' effort. "This produced, we think, significant problems for consumers."

The agreement, first revealed Friday, is the second-largest consumer protection settlement reached by a state or the federal government, the state officials said. The largest was for $484 million, obtained by a group of states in 2002 from Household Finance Corp.

The settlement covers ACC Capital Holdings Corp., Ameriquest Mortgage Co.'s holding company, and also applies to subsidiaries Town & Country Credit Corp. and AMC Mortgage Services Inc., formerly Bedford Home Loans.

The lender did not admit to any wrongdoing as part of the deal, but agreed to reform several of its business practices, including providing borrowers with full disclosures on the terms of their loans, ceasing to give its lending agents financial incentives to include higher fees or other penalties on loans and changing how it handles appraisals.

The company also agreed to submit itself to independent monitoring for five years.

"Doing the right thing for the people we serve has always been one of our core values. We regret those occasions when our associates have not met this ideal to our customers' expectations," Aseem Mital, chief executive officer of ACCCH, said in a statement yesterday.

The financial terms of the agreement set aside $295 million toward restitution to consumers and $30 million to cover legal fees and to pay for consumer education and protection programs.