Shareholders looking to hold Household International Inc. accountable for its lending practices have a proposal: link executive pay to corporate efforts to prevent predatory lending.
It is the latest move by activists to prevent a variety of abusive lending practices blamed for a wave of foreclosures. As a result of public outcry, several states, including Illinois, have instituted measures against predatory lending.
In a corporate filing, Household’s board of directors recommends that stockholders vote against the proposal at the company’s annual meeting this week in Brandon, Fla.
The Prospect Heights-based lender, the nation’s largest independent finance company specializing in lending to people with spotty credit records, says its senior executives already are compensated based in part on compliance with laws and a statement of business principles.
The board-approved statement requires that every employee “act honestly and fairly at all times” and “comply with all applicable laws and regulations,” according to the filing.
The shareholder proposal, to be presented by Boston-based Northstar Asset Management Inc., a firm that specializes in socially responsible money management, calls for more specific requirements, which could include staff training programs about predatory lending and efforts to reduce the level of predatory lending complaints filed with the government.
The proposal also takes issue with Household’s practice of packaging loans with “single-premium” credit insurance.
Household argues that some people prefer to pay for credit insurance–which pays off loans in the event of death, disability or other events–up front, even though it means wrapping the single premium into their total loan package and paying interest on it. The company also is rolling out a credit insurance product that can be paid monthly.
Giving credit: Bank One Corp. executives have taken pains over the past year to convince investors that credit-card unit First USA, whose problems precipitated the company’s 1999 earnings and stock price plunge, is back on track.
The improvements led to first-quarter 2001 net income of $148 million at First USA, up from $67 million a year earlier. But details of the turnaround were sketchy until a recent presentation by the unit’s new boss, Philip Heasley.
At Goldman Sachs’ annual credit card conference in late April, Heasley outlined improvements in customer service and profitability at the card giant.
Customer satisfaction was at 80 percent in the first quarter, up from 65 percent in the fourth quarter 1999, according to First USA.
And card payments now are posting the same day they are received 99.9 percent of the time–a big deal to cardholders previously slapped with late fees and higher interest rates when First USA posted payments late.
To boost profitability, First USA is focusing more heavily on credit cards issued in partnership with airlines and sports teams and other sectors.
Such accounts have 50 percent lower attrition and 40 percent better credit quality, Heasley said.
