Senator Sarbanes Introduces Legislation To Combat Predatory Lending Practices
May 2, 2002
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).