NC Consumers collect $20.2 million in Associates settlement

Roy Cooper
North Carolina Attorney General

Contact: Noelle Taylor 
Date: September 16, 2002 
Phone: 919/716-6413 
Associates $20.2 million consumer settlement is largest in NC history

AG Cooper wins refunds for more than 11,000 consumers

(RALEIGH, N.C., Sept. 16, 2002) -- One year after mortgage lender The Associates agreed to repay customers to resolve charges that the company “packed” single premium credit insurance into loans, North Carolina consumers have collected $20.2 million in refunds, Attorney General Roy Cooper announced Monday.

“The Associates preyed on homeowners, tricking them into paying for expensive and unnecessary insurance,” Cooper said. “Now, not only have we won their money back, but we’ve stopped predatory lending in North Carolina.”

The Associates agreed last September to reimburse North Carolina mortgage holders to resolve allegations by Cooper that the company added expensive prepaid credit insurance premiums to loans without homeowners' knowledge or understanding, and then financed those premiums at high interest rates over the life of the loan. Consumers qualified for a refund if they purchased credit insurance on their loans from August 1, 1995 until July 1, 2000, when new state laws banning the practice of insurance “packing” took effect. 

Approximately 17,000 refund notices went out to Associates customers across North Carolina last December. Follow-up mailings went to any consumers who did not reply within 30 days. To date, 11,178 consumers have received checks or credits totaling $20.2 million, with $7.7 million paid out in cash to former borrowers and $12.5 million credited to the accounts of current borrowers. Still pending are 176 claims worth a total of $560,000. Nearly 65 percent of Associates customers took advantage of the reimbursement offer, collecting refunds that ranged from $100 to $15,000 and averaged around $1,800.

The $20.2 million settlement is the largest consumer settlement in state history and was the largest consumer settlement in the nation last year achieved by a single state. North Carolina was the first state to target The Associates when the Attorney General’s office began its investigation in July 1999. The Federal Trade Commission has since filed a lawsuit on similar grounds and is currently negotiating a national settlement with Citigroup, according to reports in the Wall Street Journal. Citigroup acquired The Associates in 2000 and has since stopped the sale of single premium credit insurance on its mortgage loans.

“Our state made history by being the first to go after The Associates for this type of predatory lending,” said Cooper, who as a state senator wrote the laws banning predatory lending. “We wanted to help consumers get their money back, but we also wanted to send a warning to other companies that we will not tolerate predatory lending in North Carolina.”