New York's
Senator CHARLES E. SCHUMER
FOR IMMEDIATE RELEASE March 13,
2001
SENATE PASSES SCHUMER AMENDMENT TO BANKRUPTCY
BILL TO CRACK DOWN ON PREDATORY LOANS
Measure Forces Predatory Lenders To Pass Along
Liability To Buyers of Loans During Chapter 11 Proceedings, Making
it More Difficult to Discharge Assets
The US Senate unanimously accepted an amendment to
the Bankruptcy Reform Act of 2001 this evening proposed by US
Senator Charles E. Schumer that will prevent
predatory lenders from using bankruptcy law to shield themselves
from liability and cut off consumer claims and defenses.
Schumer's amendment protects consumers from
purchasers of predatory loans who know the consumer's rights to
recover are terminated with the loan's sale. In essence, the
amendment precludes lenders from "laundering" dirty loans through
bankruptcy.
"Predatory lenders are able to rob homeowners of
their livelihoods and then hide behind our bankruptcy laws and pass
off their bad loans to other buyers," said
Schumer. "My amendment makes that much harder. The consumer retains
her rights regardless of who buys the loan or the original lender
remains liable. Either way, the consumer can recover."
In recent months, several large subprime lenders
have sold their loans in bankruptcy court without passing along the
liability that comes with making predatory loans to the new buyer.
As a result, the predatory lender is able to discharge its liability
without incurring penalties and consumers who later attempt to
challenge these loans are told the buyer and the original predatory
lender are both free from liability.
"By making banks and other loan buyers liable for violations of
federal fair lending laws, buyers will use more discretion when
buying loans and predatory lenders won't be able to get off the hook
so easily," said Schumer. "Right now, two wrongs take place: when
the predatory loan itself is made and when the predatory lender
passes off the loan in bankruptcy proceedings and the consumer loses
the right to recover. This amendment, potentially, could correct
both."
The amendment will be included in the final Senate
version of the bankruptcy reform bill which will be voted on later
this week. The final Senate version will then go to a joint
House-Senate conference committee that will reconcile the
differences between the two versions of the bills. Schumer will sit
on the conference committee.
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