WALLINGFORD, Conn. — As a member of Governor M. Jodi Rell's Task Force on Subprime Lending, Credit Union League of Connecticut President/CEO Kevin Chandler heard testimony on how one Connecticut resident in particular was hit by predatory lending.
"Like many borrowers, I was steered into this adjustable rate without being given a choice and was lied to by my broker about how it worked and what I could do," Donna Pearce said. "Even though I had good credit, I was given two separate loans–one with an 8.6% interest rate, and the other with a 13% interest rate. When I asked my broker about it, she told me not to worry because I could just refinance in six months." She had been making the higher than expected payments with family help, but when she could not refinance in the spring she received foreclosure notices.
Connecticut Attorney General Richard Blumenthal also testified at the hearing that such predatory lending schemes are not unique or rare. "My office has been inundated with complaints and inquiries," he testified. "What we're seeing is the endless and enduring ingenuity of financial predators in this area."
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This type of practice is exactly what the task force is working to eradicate, Chandler said. "As not-for-profit credit unions, we have an important role to play in ensuring that all consumers–even those who are not members–are protected from these unscrupulous predators," Chandler said. "But it's important to remember that 'subprime' lending is not 'predatory' lending if it's done on the up-and-up, and we ought not throw the baby out with the bath water."
On the predatory side are prepayment penalties and deceptive and misleading statements. "Witness after witness had the same story of being misled, lied to, cajoled and plied with false reassurances," Chandler said. "Credit unions need to step up to the plate and lead by example on this issue."
The task force also includes representatives from state regulatory agencies, Fannie Mae, Freddie Mac, the U.S. Department of Housing and Urban Development, and several state lawmakers.
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