House Committee May Introduce Legislation on Subprime Lending

The House Committee on Financial Services may introduce a bill today that would address predatory-pricing tactics in the lending industry.

The legislation would trump state laws regulating the lending practices of banks, thrifts, and mortgage lenders. The purpose of the legislation is to prevent abusive lending practices aimed at low-income or risky borrowers. Such practices include charging risky borrowers extremely high interest rates, pre-payment penalties, and other exorbitant fees. Many states and cities already have laws to address these issues but some consumer advocates and individuals in the lending industry feel that more must be done. Federal legislation would create uniformity and increased protection for consumers, especially those consumers in states that do not have laws to protect against these abuses. (washingtonpost.com)

Mark Pearce, president of the Center for Responsible Lending, a borrower-rights group, is concerned that federal legislation may take away from the protections some states have already put in place for consumers. "The states have shown that it's possible to pass a strong law that still protects a vibrant, responsible subprime market,"  Pearce said.  "When we look at federal legislation, one big question is, would anything at the federal level undo what the states have done, because the states have been the leaders on this issue." (washingtonpost.com)

Industry lobbyists stated yesterday that the House is likely to draft a passable bill, especially considering the recent passage of the bankruptcy bill in the Senate.