WASHINGTON-Rep. John LaFalce (D-N.Y.) and Senator Paul Sarbanes (D-Md.) introduced "The Predatory Lending Consumer Protection Act of 2000" on April 12, bringing the focus of efforts to curb the worst practices of lenders who specialize in the subprime market by targeting low income areas for high-priced financial services to Congress. What is "predatory" and what may be considered "subprime" may shift as the legislation moves, but two areas of concern are involved, and two venues have been grappling with the issue. One is predatory mortgage lending; the other is the payday loan and the car title loan. The venues are at the state and federal level. The effort against both began with the states and were helped along by credit union involvement. And momentum has been spurred on by community activist groups such as ACORN, the Association of Community Organizations for Reform Now, Chicago's Woodstock Institute and other grassroots organizations. Then there is the role of the press and broadcast TV news magazines that highlighted worst case scenarios. Those examples helped ignite a groundswell that could result in some version of a bill getting out of committee. LaFalce also brought forward an anti-payday lending bill in early March (CU Times, March 15). Meanwhile, the trade association that represents payday lenders is mounting a public relations campaign of its own, claiming it has been unfairly demonized by a crusading media; while subprime banking affiliates and mortgage companies seem bent on working to craft bills with which they can live. ACORN has pushed for legislation against predatory lending in six states, but only North Carolina has so far passed an anti-predatory law that addresses the issue (CU Times, April 12). Rep. James Leach (R-Iowa), the banking committee chair, has stated he has become increasingly convinced of the need for new laws. In Florida, where the Florida Credit Union League has spearheaded a successful effort to pass rate caps on both car title and payday loans at the municipal level (over 23 towns or counties did so) there was jubilation this week. On April 11 it was announced that Orlando Sentinel writer John C. Bersia had won a Pulitzer Prize for a series of editorials against predatory lenders. FCUL's Mark Ivester told Credit Union Times that Bersia's series, titled "Fleeced in Florida" had drawn national attention to the need to deal with the excesses of an industry that grew because of the state legislature's inaction. Bersia was briefed by the FCUL and followed Ivestor's efforts as he presented his case before town councils and county commissions. "I'm very pleased for John, who attended our Community Outreach Conference in Orlando last October, and I'm hopeful that this honor will translate into something meaningful in the Florida legislature," he said. Ivester noted that a measure to allay the car title loan companies looks good for passage this session, but that the payday bill's outlook is "murkier." While passing a federal law is very difficult, ("Good luck to Mr. LaFalce," said Ivester) given that state governments and state supervisory agencies typically find it intrusive, there may be a considerable effort to bring it to a screeching halt. The Community Financial Services Association of America, the payday lenders trade, has begun a lobbying effort of its own: to educate reporters about what they call a bad law. La Falce's bill would put them all out of business, says CFSA; and the business they are in fulfills a burning consumer need that is not being met by banks, thrifts or credit unions. "Banks and credit unions don't make loans of just a couple hundred dollars for two weeks because it's too expensive and too risky," informs a recent CFSA-issued memo. And in a housecleaning measure to regulate the excesses of its own industry, CFSA issued its own reforms or set of "Best Practices," (CU Times, Feb. 2). Banking regulators are considering measures to address the problem, and a Federal Reserve proposal would require that payday lenders comply with Truth in Lending Act disclosures (Reg Z) so that borrowers will be informed of the cost of a loan and the finance charge as an annual percentage rate. The snarl over competing lobbying efforts -subprime lenders want to avoid a patchwork of state laws; community groups want a comprehensive, national approach, and states want to maintain autonomy by enacting their own protections-could result in no action being taken. That's why some credit unionists, particularly in North Carolina, want NCUA to promulgate a regulation against predatory practices, and they have appealed to CUNA and NAFCU's to push the effort. CUNA announced its support of the LaFalce/Sarbanes bill, saying it "cracks down and cracks down hard" on predatory practices. "CUNA is developing model mortgage lending standards for credit unions," said CEO Dan Mica. "We want to set an example and be a beacon for ethical lending in the mortgage market." -
caburger@cutimes.com
