Subprime Lenders Warned: Tighter Policing on the Way

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Subprime lenders can expect more consumer protection laws and heavier enforcement to curtail so-called predatory lending, federal and state regulators said Tuesday.

Targeted practices include frequent refinancings at high rates, excessive fees, or ignoring a customer's ability to repay. For example, these practices would be barred under a North Carolina law that takes effect next summer and a proposed rule in New York.

At a fair-lending conference sponsored by the Consumer Bankers Association, Kenneth Markison, an assistant general counsel of the Department of Housing and Urban Development, said current federal law is not strong enough to stop kickbacks to loan brokers or bar unreasonable fees, such as heavy prepayment penalties.

But bankers said additional laws and regulations could deter them from extending loans to people with poor or no credit histories.

"There are laws to deal with the bad actors," said Robin Warren, associate general counsel of Bank of America Corp. in Charlotte, N.C. "What I fear is these truly heartrending situations will lead to bad laws."

But Edward F. Holley, a deputy superintendent of New York's banking department, said lenders that follow the rules will not run into trouble. …