Friday, May 9, 2003

Predatory lending bill stresses consumer education

Congressman David Scott has introduced a bill to prevent predatory lending by building greater awareness of such practices through better coordination and delivery of consumer education counseling.

The legislation would improve consumer literacy, reduce harmful mortgage lending practices, and provide borrowers with a nationwide toll-free telephone number to receive complaints regarding predatory lenders and create a resource database of information.

"While expanded access to credit from both prime and sub-prime lenders has contributed to the highest home ownership rates in the nation's history, there is growing evidence that some lenders are engaging in predatory lending practices - excessive front-end fees, single premium credit life insurance, and exorbitant prepayment penalties - that make home ownership much more costly for families that can least afford it," said Congressman Scott.

This legislation would focus specifically on getting valuable information to the targeted victims so they can recognize such lending schemes and would arm them with one nationwide toll-free hotline to report such practices and receive advice. Predatory loans are said to have grown rapidly in minority neighborhoods, often stripping away wealth that may have taken homeowners decades or a lifetime to accumulate.

Some communities which lack access to traditional institutions are being victimized by second mortgage lenders, home improvement contractors, and finance companies who peddle high-interest rate home equity loans with high loan fees to cash-poor homeowners.

"Although there are many different groups with educational information regarding predatory lending practices, there is a missing link regarding delivery of such information to those consumers most targeted by such lenders. This bill, with its toll-free hotline, will ensure that consumers are not helpless when the feel they are being taken advantage of by predatory lenders. With this bill, they will have somewhere to turn," said Scott.