May 2, 2002
Senator Sarbanes Introduces Legislation To Combat
Predatory Lending Practices
Senator Paul S. Sarbanes (D-MD), the
Chairman of the Senate Banking, Housing, and Urban Affairs, was
today joined by several of his Senate colleagues, Mayors, and
representatives from groups who have been actively involved in
efforts to combat predatory lending across the country, in
introducing "The Predatory Lending Consumer Protection Act of
2002." [pdf] The legislation is designed to restrict abusive
predatory lending practices, expand consumer protections, and
strengthen enforcement of existing protections in current law by
enhancing civil remedies and statutory penalties.
Predatory lenders typically target
vulnerable people with equity in their homes. They underwrite the
property without establishing a borrower's ability to repay the
loan. The brokers or lenders typically make their money by charging
extremely high points and origination fees, and by "packing" other
products into the loan, including up-front premiums for credit
insurance, for which they get significant commissions. The financing
of these fees greatly increases the balance of the loan and leaves
the borrower with exorbitant monthly payments, in many instances
leading to the loss of the home.
"Homeownership is the opportunity
for Americans to put down roots and start creating equity for
themselves and their families," said Sarbanes. "Homeownership has
been the path to building wealth for generations of Americans.
Homeownership has been the key to ensuring stable communities, good
schools, and safe streets. Common sense tells us, and the evidence
confirms, that homeowners are more engaged citizens and more active
their communities. Little wonder, then, that so many Americans
aspire to achieve this dream."
"The predatory lending industry
plays on these hopes and dreams to cynically cheat people out of
their wealth in their homes," Sarbanes added. "These lenders target
lower income, elderly, and often, uneducated homeowners for their
abusive practices. They overwhelmingly target minorities, driving a
wedge between these families and the hope of a productive life in
the economic and financial mainstream of America."
The bill was endorsed today by the
AARP, ACORN, Center for Community Change, Consumer Federation of
America, Consumer's Union, Leadership Conference for Civil Rights,
NAACP, National Association of Consumer Advocates, National Consumer
Reinvestment Coalition, National Consumer Law Center, National
League of Cities, Self-Help Credit Union, and the US Conference of
Mayors.
Joining Sarbanes in sponsoring the
legislation were 14 of his colleagues, all Democrats: Senators Chris
Dodd (CT), Chuck Schumer (NY), Debbie Stabenow (MI), Jon Corzine
(NJ), Edward Kennedy (MA), John Kerry (MA), Barbara Mikulski (MD),
Richard Durbin (IL), Barbara Boxer (CA), Paul Wellstone (MN), Robert
Torricelli (NJ), Hillary Rodham Clinton (NY), Mark Dayton (MN), and
Carl Levin (MI).
A summary of the legislation is available here.
The full text of the bill [pdf]
is available here. |