By Dolores Kong, Globe Staff, 4/14/2002

When interior designer Deborah Bluestein needed money to pay for training and travel and to help her son buy a condominium, she got a $5,000 loan. Then she used the equity in a rental property to borrow another $20,000 from the same company.

What she did not realize until after she got back from six months abroad was that $340 of the $378 payment she faithfully sent to the financing company every month went to finance charges and to credit insurance she said she never signed for.

"Whatever few pennies were left went to the balance," said Bluestein, of Cambridge. "There was never anything getting paid down. It was wild."

Nancy Cook, a clerk who owns a three-family house in Mattapan, started borrowing from high-rate lenders when she encountered health and financial troubles. One of her lenders was Bluestein's, too: Household Finance.

In a series of refinancings with Household and other lenders, going from one high-interest loan secured against her home to another, Cook found herself paying stiff prepayment penalties and getting socked in other ways.

"It just got to be so much. All I want to do is just survive," she said.

Bluestein and Cook are among 50 Massachusetts borrowers who have just filed or soon will file complaints about Household's lending practices with the state attorney general and the state Division of Banks. And across the country, a growing concern over so-called predatory lending has prompted regulatory action.

Last month, the Federal Trade Commission and state attorneys general announced a $60 million settlement by California-based First Alliance Mortgage Corp., to compensate 18,000 people whom regulators say were deceived into paying high fees and interest. More than 275 Bay State families will split about $825,000 in the case, according to Attorney General Thomas F. Reilly's office.

On a separate front, the Massachusetts Commission Against Discrimination has launched its own investigation into predatory lending. In a letter sent last month, the MCAD asks people who recently bought a home or refinanced to participate in "an important study on real estate practices" that may help "find out whether specific individuals and firms are involved in practices that are in violation of federal and state fair housing laws."

The study involves a 60- to 90-minute confidential interview in English, Spanish, or Haitian Creole. Participants will be reimbursed $25. "The MCAD is always looking for ways to reduce any type of housing discrimination, wherever it exists," said Dorca I. Gomez, its chairwoman.

Subprime lenders, which lend to people with credit problems, say it's legal to charge higher interest and fees because of the higher risk they face. But regulators, housing activists, and borrowers say some lending practices are deceptive and may be illegal.

The complaints from Massachusetts against Chicago-based Household Finance are being coordinated by the Association of Community Organizations for Reform Now, or ACORN, a national housing advocacy group.

"A lot of it is deceptive practices," said Chris Leonard of ACORN's Dorchester office. "We filed five complaints last year, 16 earlier this year, and 30 more are in the pipeline."

Bluestein's complaint is among the 16 filed with the Bay State attorney general's office and the Division of Banks; Cook's will be among the 30 to be filed within the next few weeks, Leonard said.

A spokeswoman for Household, Megan Hayden, disputed ACORN's contentions, and those of Bluestein and Cook. The finance company, she said, fully discloses the terms of its loans and has adopted a "Best Practices Initiative" with consumer protections that go beyond what any other similar lender provides. She said complaints forwarded by regulators are always addressed.

As to Bluestein's and Cook's concerns about prepayment penalties amounting to six months' interest, Hayden said: "We charge prepayment fees on loans to offset origination costs. We are within all of our rights to recoup the cost of loans."

Household, one of the nation's oldest consumer lenders, with brands known as HFC and Beneficial, announced in February that it will give new real estate borrowers a clear choice: a lower-rate loan with a prepayment fee, or a higher-rate loan without such a fee. Household will also set a 5 percent cap on certain origination and discount fees (when the maximum allowable is 7.5 percent).

That's little consolation for Bluestein, Cook, or any of the other Household customers who said they felt misled.

Cook first went to Household to refinance a high-rate mortgage she obtained when she had been out of work, but had house repairs to make. She borrowed from Household several times, but said she felt misled about prepayment penalties and other fees.

She then refinanced a Household loan with another high-rate lender, which boosted her monthly payments to $2,000. She's now in the process of refinancing one more time, at about a 6 percent interest rate, fixed for 30 years, through an ACORN subsidized mortgage program that is partly funded by Fleet, Citizens, and Sovereign banks.

"I'm blessed. At least now I'll be saving $400 a month," said Cook, who has owned her Mattapan triple-decker for 30 years.

Bluestein, a self-employed interior designer, became a Household borrower when she got an unsolicited mailing from the company, featuring a $5,000 promotional check that became a loan when she deposited it. The check arrived when she was trying to help her son buy a condo.

Household then offered her more money, with the final loan for $20,000 at 18 percent. Being self-employed and taking time off to travel made it difficult for Bluestein to qualify for lower-rate loans at the time, but she has since been able to refinance with another company at 8.99 percent. She had to pay six months' interest to Household as a prepayment penalty, however, and is still trying to get Household to reimburse her for the $35 monthly charge for credit insurance.

Bluestein has since cut up her Household credit cards and other reminders of that difficult period. Trained as an artist, she took the cut-up cards and other objects and decorated a mirror with them, calling the piece "Creditus Interruptus."

"I have to stress I take responsibility for the choices I've made," she said. "We just need to be more educated about the predatory nature