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Sub-Prime Lender Settles 2 Suits

May 11, 1999|From Associated Press

BOSTON — Associates First Capital Corp., one of the nation's largest home-equity lenders, has agreed to settle two lawsuits by implementing a new mortgage policy that will lower annual interest rates for clients who make monthly payments on time.

The company, also known as the Associates, agreed to the move after meeting with Boston-based Neighborhood Assistance Corp. of America, which helps low-income people buy homes.

The two suits, both seeking class-action status, were filed Friday on behalf of two dozen plaintiffs in Massachusetts and California.

"It will absolutely restructure this $300-billion industry of sub-prime lending," said Bruce Marks, executive director of Neighborhood Assistance Corp. of America. "It's a significant victory."

The sub-prime lending industry provides high-interest loans to people who have many debts or bad credit.

"We came to a meeting of the minds," Joseph Stroop, the Associates' spokesman, told the Boston Globe from the company's headquarters in Irving, Texas.

The suits alleged the company engaged in "flipping"--charging high interest rates, then asking customers to refinance, earning more fees for each loan.

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