Lending on the Cutting Edge. (President's Position)
Smith, Jim, ABA Banking Journal
WASHINGTON IS SENDING THE unmistakable message that predatory lending will not bc tolerated, and a number of state governments have already passed legislation. Bankers are not the predators, but our industry should be paying close attention to the growing chorus of concern over this issue.
In March the Federal Trade Commission announced a $60 million settlement with a California mortgage lender accused of preying on elderly homeowners. The settlement was the FTC's second largest ever, and the government's biggest predatory lending settlement. The FTC suit alleged that First Alliance Mortgage Co. misrepresented how interest rates on its fees would change over time, and what fees would be assessed. More than 18,000 borrowers in 18 states were affected. First Alliance and its affiliates have since filed for bankruptcy and were to be liquidated, according to the FTC.
Bankers hold the high ground on this issue, but when stories like the above hit the newspapers, the general public might wonder whether predatory lending practices aren't common among more lenders.
Your ABA condemns predatory lending, and I feel certain that our condemnation carries the full endorsement of every ABA member. Your national association has used every written testimony, comment letter and conversation with members of Congress on this issue to drive home the point that bankers oppose such lending abuses. Last year ABA formed a banker-led Lending Practices Working Group to take the lead in educating consumers, local communities and our industry on ways to combat illegal loans. And ABA has developed and distributed extensive public education material on this subject. (Many of these resources are available at www.aba.com or by calling 1-800-BANKERS.)
What's been lacking, in part, is an accurate definition of predatory lending. Defining the term has been troublesome for our federal regulators, and the differences between predatory and subprime lending have often been clouded. …