The lending industry gets a lot of flak for the way it conducts business. Tactics such as targeting the working poor and racial minorities, imposing prepayment penalties, forcing pre-dispute arbitration clauses into contacts and setting other devious debt traps have received a lot of scrutiny. Sure, no one likes to see a veteran and his family get kicked to the curb. But you have to admit, it’s a heck of a lot better than indentured servitude.
Kidding aside, Congress is taking action to help protect consumers. Or is it?
On Thursday, the House passed the Mortgage Reform and Anti-Predatory Lending Act of 2007 (H.R. 3915) in a 291-127 vote. While it would do some good like requiring lenders to evaluate a borrower’s ability to repay a loan, there are several provisions that consumer advocates and public interest groups are warning will make things worse for borrowers [PDF].
For example, a broad preemption provision would make current and stronger state laws on predatory lending obsolete. Homeowners whose loans were sold off–usually to some Wall Street investment group–would be unable to fight back in foreclosure because there would be no meaningful federal protection from abuses by the new owners of their loans.