Civil Rights Leaders To Fight Lending Bill: Proposal Harmful to Black Families

• Originally published in The Washington Post on March 25, 2005 Copyright 2005 The Washington Post

By Sandra Fleishman, Washington Post Staff Writer

Consumer advocates are bringing out big names from the civil rights world to try to keep a lending industry-backed bill on predatory mortgage lending from rolling through Congress the way recent bankruptcy legislation did.

NAACP Chairman Julian Bond, the Rev. Jesse L. Jackson and Wade Henderson, executive director of the Leadership Conference on Civil Rights, and their groups are joining with consumer groups to oppose a bill introduced earlier this month by Rep. Robert W. Ney (R-Ohio), chairman of the House Financial Services housing subcommittee, and Rep. Paul E. Kanjorski (D-Pa.), the senior Democrat on the capital markets subcommittee.

The civil rights leaders and the head of the National Fair Housing Alliance are expected to issue a statement today urging Congress to reject the Ney-Kanjorski proposal. The Post obtained a copy of the statement yesterday.

"Representatives Ney and Kanjorski have failed to provide meaningful protections in their mis-named 'Responsible Lending Act,' " Bond said in the statement. "Their bill demonstrates a failure to address the real pain caused by predatory lending and the harm it is doing to African-American families."

The strong words seem to take the long-running debate over how to crack down on predatory lending back to where it has been for years, with a deadlock between lenders pushing for federal preemption of tougher state laws and consumer and civil rights groups arguing that proposed GOP fixes are too weak. The new twist this year, however, is that Democrat Kanjorski and three black Democrats on the committee have co-sponsored the bill with Ney.

Kanjorski yesterday said that he had expected criticism but that he hopes a bill can be crafted that meets the concerns of the groups and helps protect home buyers and lenders. But, he said, the current situation is driving lenders out of states with strict laws. "There has been a very long attempt to find something that's workable, and this is a start," he said in a phone interview. "But right now it's a disaster out there with every state having a different approach" to regulation.

The civil rights groups contend that the Ney-Kanjorski approach falls far short of what is needed to stop abusive lending targeted at minorities, the elderly and immigrants and instead removes protections in existing federal law and in state and local regulations. The states and local jurisdictions have been passing laws since about 1999 as lending to subprime, or higher-risk, borrowers has exploded. Although not all subprime lending is predatory, complaints about abusive lending, with hidden or excessive fees and deceptive practices, have skyrocketed as higher-cost, subprime loans have become available.

Subprime lending now accounts for about 20 percent of the mortgage market, with about $500 billion in new loans last year.

Consumer advocacy groups, including the Consumer Federation of America, the Center for Responsible Lending, the National Consumer Law Center, the National Association of Consumer Advocates and the U.S. Public Interest Research Group, are backing a bill by House Financial Services ranking Democrat Barney Frank (Mass.) and North Carolina Democrats Brad Miller and Melvin Watt, who leads the Congressional Black Caucus. That bill is modeled on tough legislation passed by North Carolina in 1999. It does not preempt state laws.

Industry groups contend that preemption is required to eliminate what they say is a patchwork of state and local laws.

Among those supporting Ney-Kanjorski as a strong "first step" are the Mortgage Bankers Association, the National Association of Mortgage Brokers, the Bond Market Association, the American Securitization Forum and the National Home Equity Mortgage Association, which represents about 80 percent of what it terms the "non-prime" market.

Consumer groups have painted the Ney-Kanjorski bill as intolerable and an "evisceration" of state and federal protections.

Earlier this month, a coalition of those groups released an analysis saying that the legislation has too many loopholes and would hurt borrowers.

That analysis is "misleading," and the 126-page bill is not only strong but much tougher than the industry would like, said lending industry lobbyist Wright Andrews, executive director of the Coalition for Fair and Affordable Lending, which says it represents more than a third of the subprime industry. "It fails to recognize many of the strong provisions in the bill and overstates and grossly misstates what the laws around the country say."

Hearings are expected this spring, Kanjorski said yesterday.