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Nathan Newman on February 28, 2006 - 1:53pm
North Carolina was the first state to pass a law reining in shady predatory lending practices, such as steep prepayment penalties, balloon payments and the sale of high-cost loans to borrowers who could qualify for lower rates. Soon a number of other states followed with similar laws and the result, according to a new study, is that homeowners now save $9.1 billion per year.
But a proposed federal law sponsored by Reps. Bob Ney, an Ohio Republican, and Paul Kanjorski, a Pennsylvania Democrat, would override those state laws and gut consumer protections. Perhaps unsurprisingly, their campaign reports show close connections to the financial industry. Rep. Ney, of course, is infamous for his connections to Jack Abramoff and took just short of $570,000 from financial companies in 2003 and 2004. Rep. Kanjorski took almost $450,000 from the financial services industry in the 2004 election cycle, over half of the money he raised.
Contra opponents of state predatory lending laws, the new study by the Center for Responsible Lending in Durham, NC found that the 28 states that have passed such laws since 1999 have not seen a decrease in access to credit for low-income or credit-challenged borrowers in the so-called subprime market, but borrowers have benefitted from lower fees and interest rates.
Consumer rights advocates have come out in support of an alternative federal bill introduced last year by Rep. Brad Miller, a North Carolina Democrat, which would protect existing state predatory lending laws.
Also, make sure you check out how right-winger Georgia Rep. Earl Ehrhart is shilling for the title loan industry.