type: timeline_event
On January 23, 2006, Ameriquest Mortgage Company, the nation's largest subprime lender, and its holding company ACC Capital Holdings agreed to pay $325 million to settle allegations of predatory lending practices with 49 states and the District of Columbia. The settlement represents the second-largest state or federal predatory lending settlement in history at the time, after the 2002 $484 million Household Finance Company agreement.
The settlement allocates $295 million for consumer restitution and $30 million to states for costs, consumer education, and enforcement programs. States alleged that Ameriquest engaged in widespread predatory practices including misleading borrowers about loan terms, falsifying documents, pressuring appraisers to inflate home values, and charging excessive fees. At least 240,000 of Ameriquest's approximately 750,000 customers from 1999 to 2005 are expected to receive restitution. The $175 million portion covers customers who obtained mortgages from January 1, 1999 through April 1, 2003, while another $120 million compensates customers who obtained mortgages between January 1, 1999 and December 31, 2005.
The settlement, negotiated by attorneys general from New York, Iowa, Illinois, California, and Washington, requires Ameriquest to implement sweeping reforms of its lending practices. However, this settlement represents a pattern of repeated violations—Ameriquest had been the subject of at least four predatory lending settlements since 1996. The company's continued ability to operate as the largest subprime lender despite documented patterns of fraud exemplifies captured regulatory systems that permitted predatory lending to expand unchecked throughout 2006, even as evidence mounted of systemic industry abuse. The settlement took effect March 15, 2006, just months before the housing bubble would peak and the subprime crisis would begin to unfold.