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Bill in Congress Would Roll Back Predatory Lending Protections

September 7, 2005
Officials from four states warned today that a bill in Congress would weaken laws against predatory mortgage lending in 36 states, especially the 24 states with major anti-predatory lending laws on their books.

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 Ney-Kanjorski bill pending in Congress and supported by much of the lending industry would gut the strong laws in these states. Another bill, sponsored by Rep. Miller of North Carolina and supported by consumers and civil rights groups, would let states keep strong laws and protect their consumers.

The officials issuing the warning are U.S. Rep. Brad Miller (NC), New Mexico Chief Deputy Attorney General Stuart M. Bluestone, Massachusetts Rep. John F. Quinn (Dartmouth) and New Jersey Department of Banking and Insurance - Division of Banking Director H. Robert Tillman.

Reps. Brad Miller (NC) and Mel Watt (NC) and the ranking member on the House Financial Services Committee, Barney Frank of Massachusetts, have introduced a bill that prohibits abusive lending practices and ensures that everybody who can afford a home loan will get one.

The Prohibit Predatory Lending Act of 2005 (H.R. 1182) is based on the State of North Carolina’s predatory lending statute, widely considered the model for preventing abusive lending while preserving access to credit.

"This bill protects vulnerable consumers without cutting off credit for lower income borrowers. It’s time that all American consumers have the protection that North Carolina consumers now have," Rep. Miller said.

Predatory lending encompasses a wide range of abusive practices by lenders who take advantage of vulnerable borrowers. Such practices include charging excessive fees and points, repeatedly refinancing home loans while stealing the homeowner’s equity, steering consumers into more expensive loans and tacking on unnecessary and expensive extras like single premium credit insurance.

Since North Carolina’s landmark anti-predatory lending law was enacted, the state has seen a dramatic reduction in abusive lending. A recent study by the University of North Carolina at Chapel Hill found that after passage of North Carolina legislation "there was a reduction of loans with predatory terms without a restriction in access to or increase in the cost of loans to borrowers."

According to the Center for Responsible Lending, 24 states have passed anti-predatory lending laws. At least 12 more have statutes that provide meaningful protections to borrowers but were not enacted as part of an anti-predatory lending law. Arkansas, Georgia, Massachusetts, North Carolina, New York, New Jersey, New Mexico and South Carolina are among those states considered to have the strongest laws.

Other states with predatory lending laws include: California, Colorado, Connecticut, Florida, Illinois, Kentucky, Maine, Maryland, Nevada, Ohio, Oklahoma, Pennsylvania, Texas, Utah, Wisconsin, and West Virginia. Iowa and Kansas are just two examples of states with prior laws that help protect borrowers.

Finally, these laws ensure homeowners’ rights are more than symbolic by providing for meaningful damages and allowing homeowners to defend their homes against foreclosure even after their loans have been sold to another lender.

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