Instituted Pursuant To Section 21C Of The Securities Exchange Act Of 1934 ("Exchange Act") Against Household International, Inc
The Securities and Exchange Commission ("Commission") deems it appropriate that public cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") against Household International, Inc. ("Household" or "Respondent"). In anticipation of the institution of these proceedings, Respondent has submitted an Offer of Settlement (the "Offer") which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission's jurisdiction over it and the subject matter of these proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-and-Desist Proceedings, Making Findings, and Imposing Cease-and-Desist Order Pursuant to Section 21C of the Securities Exchange Act of 1934, as set forth below. On the basis of this Order and Respondent's Offer, the Commission finds1 that: Respondent 1. Household is a Delaware corporation headquartered in Prospect Heights, Illinois. Household's securities are registered with the Commission pursuant to Section 12(b) of the Exchange Act. Household's stock is listed on the New York Stock Exchange under the symbol HI. During the relevant time period, Household filed periodic and other informational reports with the Commission pursuant to Section 13(a) of the Exchange Act. Household was created as a holding company in 1981 as a result of a shareholder approved restructuring of Household Finance Corporation. 2. Household is a financial institution that, through its subsidiaries, provides a variety of loan products to consumers in the United States, the United Kingdom and Canada. Household is a Fortune 500 company with more than $97.9 billion in owned assets and with reported net revenues for 2002 of approximately $11.2 billion. Household sells its loan products primarily to sub-prime borrowers. Sub-prime borrowers are those who exhibit characteristics indicating a significantly higher risk of default than traditional bank lending customers. Household's loan products include real estate secured loans, auto finance loans, credit cards, tax refund anticipation loans, retail installment loans and other unsecured loans. As of December 31, 2002, Household had approximately 31,000 employees and over 50 million active customer accounts. Household's primary business units are Consumer Lending, Mortgage Services, Retail Services, Credit Card Services and Auto Finance. 3. Household's Consumer Lending business unit extends both secured and unsecured loans to consumers through a network of over 1,300 branch offices located throughout the United States. Consumer Lending has approximately $43.4 billion in managed receivables. Managed receivables include the sum of Household's owned receivables and those that it services for investors as part of its asset securitization program. The Mortgage Services business unit is involved primarily in the purchase in the secondary market of mortgage loans that are originated by other lenders, as well as the servicing of these loans after they are purchased. Mortgage Services has approximately $17 billion in managed receivables. The Retail Services business unit is one of the largest providers of third-party private label credit cards in the United States, with approximately $12.6 billion in managed receivables. The Credit Card Services business unit includes both the direct issuance by Household of credit cards to consumers and Household's purchase and servicing of credit card accounts originated by third parties. The Credit Card Services business unit has approximately $18.1 billion in managed receivables. The Auto Finance business unit extends secured loans to consumers and purchases installment contracts from auto dealers and has approximately $7.4 billion in managed receivables. 4. One of the critical measures of Household's financial performance is the delinquency rate for its loan portfolio and related disclosures and statistics concerning the restructuring (or so-called re-aging) of delinquent accounts. Household, like its peer lending institutions, reports to the investing public its "2+ delinquency" rate. The 2+ delinquency rate refers to the percentage of loans in Household's total loan portfolio that are at least sixty days past due. The 2+ delinquency rate and restructuring statistics are key measures of Household's financial performance because they positively correlate to charge-off rates and loan loss reserves. Investors and analysts use Household's 2+ delinquency rate and restructuring statistics to evaluate the relative credit quality of Household's consumer finance receivables. The 2+ delinquency rate and restructuring statistics are especially important for sub-prime lenders like Household because of the increased likelihood of credit quality problems in sub-prime loan portfolios
Contact our
Washington Wills & Trusts Lawyer Now!
|
