Magazine article American Banker

Philly Anti-Predator Law Targets Nonbank Lenders

Magazine article American Banker

Philly Anti-Predator Law Targets Nonbank Lenders

Article excerpt

The Philadelphia City Council unanimously passed an ordinance Thursday to ban predatory lending in the city and require loan counseling for borrowers charged high interest.

The city is targeting nonbank lenders, however. Its ordinance exempts state and national banks and thrifts and trust companies, a fact that infuriates E. Robert Levy, executive director of the New Jersey Mortgage Bankers Association.

"It exempts banks, savings banks, and savings and loan associations from all of the provisions of the bill dealing with predatory lending, notwithstanding that these institutions compete with mortgage bankers, brokers, and others in the subprime market in Philadelphia," Mr. Levy said.

"Frankly, in my estimation, it is one of the worst pieces of legislation dealing with lenders I have ever seen," he said.

The ordinance took effect immediately and prohibits lenders from making subprime or high-cost loans or helping others to do so. A high-cost loan is defined as one with an interest rate more than 6.5 percentage points above the yield on Treasury securities with comparable maturities and total points and fees financed equal to four percentage points of the loan amount.

The ordinance defines a high-cost lender as one that has made 10 high-cost loans or whose loans in this category comprise 5% of annual loan volume.

Under the law, each predatory loan is a separate violation. Fines range from $100 to $300 per day in violation. In addition, lenders found to be predatory will lose all contracts with the city or city agencies. …

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