The Commission found that, in the Management's Discussion and Analysis of Financial Condition and Results of Operations portion of annual and quarterly reports filed with the Commission since March 13, 2002, Household made materially false and misleading statements concerning its restructuring and account management policies.
In particular, the Commission found, in its filings, that Household misrepresented its policies that permit the restructuring of delinquent loans (and the resetting of such loans to "current"). Household misrepresented its policies by falsely stating that it only restructured delinquent loans after receiving a certain number of consecutive payments and after obtaining evidence that the cause of the delinquency had been cured. In fact, Household restructured many loans after receiving fewer than two payments, and restructured many loans automatically without communications with the borrower at the time. In addition, the Commission found that Household's disclosures in Commission filings relating to its restructuring and account management policies are also misleading because Household omitted to disclose its policy of excluding forbearances from so-called 2+ delinquencies in certain businesses. As a result of these misrepresentations, the Commission found that Household committed violations of Sections 10(b) and 13(a) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1 and 13a-13 thereunder.
"Restructuring policies directly impact a financial institution's reported delinquency rates, which analysts and investors use as a key measure to evaluate the financial condition of a company like Household," said Mary Keefe, Director of the SEC's Midwest Regional Office. "By making false statements about its restructuring policies, Household made it more difficult for analysts and investors to evaluate Household's financial performance."
The Commission's investigation is continuing.
