Predatory Lending Bill A Ruse, Consumer Groups Charge

March 16, 2005
A new bill introduced in Congress by Reps. Robert Ney of Ohio and Paul Kanjorski of Pennsylvania would demolish many of the protections states and the federal government have carefully erected against predatory lenders and would expose millions of homebuyers to the loss of their savings and even their homes, consumer advocates said.

Predatory Lending • Some Payday Lenders Operate Outside U.S. Law • Payday Lenders Resist APR Comparisons • Massachusetts Settles Predatory Lending Charges For $10 Million • California Payday Lenders Target Blacks, Latinos • States Battle Feds To Enforce Lending Laws • Payday Loans Can Lead to Bankruptcy • Study Disputes Lenders' Excuses for Charging Blacks and Latinos Higher Rates • ACORN Names Money Mart "Loan Shark of the Year" • States Battle Feds Over Predatory Lending Laws • States Warn Bill in Congress Would Roll Back Predatory Lending Protections • Ney-Kanjorski Bill A Ruse, Consumer Groups Charge • Business Interests Target "Activist" Attorney Generals • Option One Agrees to Clean Up Its Lending Practices in Pennsylvania • Pennsylvania Tackles Predatory Lending • Predatory Lending Guidelines Too Vague, Consumers Group Charges • North Carolina Court Strikes Down CitiFinancial's Mandatory Arbitration • Congress Targets Predatory Lending • CitiGroup Settles Predatory Lending Charges for $215 Million • Household Settles for $484 Million • Consumers File Class Action Suit Against Household • FTC Charges Associates, Citigroup With Predatory Lending Practices

The bill would preempt state laws proven effective at curbing abusive lending and replace them with a weak federal standard.

"The numerous loopholes in this bill show a lack of understanding of how predatory lending steals the home equity of thousands of American families every year," said Mark Pearce, president of the Center for Responsible Lending, a nonprofit, nonpartisan policy and research grou.

Pearce said his organization regards the bill as an attempt by lenders to get around strong predatory lending laws.

Predatory lending robs homeowners of more than $9 billion a year, CRL estimates, and threatens the poorest of homeowners: the elderly, minorities, immigrants -- those least able to survive these scams with homes and savings intact.

Predatory lenders, including some large financial institutions, threaten entire neighborhoods as people lured into borrowing more than they can afford at unconscionably high fees later lose their homes to foreclosure.

"We simply can't afford the costs that come with it: The boarded-up houses in struggling neighborhoods, the hard-earned gains of working-class people wiped out by predatory lenders. At bottom, that is what this debate is all about," Pearce said.

Istead of the Ney-Kanjorski measure, Pearce's group is supporting a bill by Reps. Brad Miller and Mel Watt of North Carolina and Barney Frank of Massachusetts. It is modeled on a North Carolina law proven to cut predatory loans while ensuring everyone can still get a home loan.

The Miller-Watt-Frank bill would eliminate loopholes in federal law rather than create new ones, Pearce said..

Other consumer groups have joined CRL in opposing the bill.

"The bill's proposed evisceration of all effective remedies under federal law for home mortgages, combined with the preemption of state protections, completely negates any proposed improvements for consumers," said Margot Saunders, managing attorney at the National Consumer Law Center in Washington, D.C. "On behalf of our low-income clients, who are homeowners throughout the U.S., we will oppose this bill."

"Data brokers like Choicepoint, air polluters, rent-to-own stores, car rental companies and now predatory mortgage lenders are all seeking federal safe harbors from strong and innovative state consumer and health protections," said Ed Mierzwinski, consumer program director of U.S. PIRG. "So we'll keep fighting to convince Congress to make federal laws floors, not ceilings. Otherwise we cannot guarantee our citizens the protections they deserve."

The Consumer Federation of America also opposes the bill in its current form.

"It falls considerably short in key areas and does not provide the necessary safeguards that would truly eliminate incentives for lenders to make predatory loans nor does it preserve access for justice for victims of abusive mortgage practices," said Allen J. Fishbein, director of housing and credit policy. "Consumers require protections beyond what is provided for in this bill

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