Magazine article American Banker

$60 Million Settlement in Subprime Lending Case

Magazine article American Banker

$60 Million Settlement in Subprime Lending Case

Article excerpt

The Federal Trade Commission announced Thursday that it had reached a settlement with a bankrupt California subprime lender, First Alliance Mortgage Co., that could return as much as $60 million to borrowers.

The deal, which the FTC announced along with five state attorneys general, the New York State Banking Department, the AARP, and lawyers for aggrieved borrowers, is one of the largest consumer-protection recoveries in FTC history, the commission said.

If a federal district court in Santa Ana, Calif., approves the deal, as many as 18,000 borrowers will be paid $2,500 to $3,300 each.

"The message today should be unmistakable: Fraud and deception by subprime lenders will not be tolerated," said FTC Chairman Timothy J. Muris at a press conference to announce the settlement.

The New York State superintendent of banks, Elizabeth McCaul, said the settlement is the largest ever involving a predatory lender. The state's Banking Department began investigating First Alliance in 1998, she said.

"It's a very significant win for consumers around the country," Ms. McCaul said. "It tells lenders that we will not tolerate abusive lending practices and there are going to be very significant financial penalties."

The FTC sued First Alliance and Brian and Sarah Chisick, in October 2000. Mr. Chisick was the company's president and chief executive officer.

Last May a federal district court consolidated the FTC's complaint with complaints that had been filed by the Arizona, California, Florida, Illinois, Massachusetts, and New York attorneys general, the AARP, and other plaintiffs. …

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