Senate Slates Further Hearings on Predatory Lending Bills; Advocate ‘Optimistic’ on Legislative Action

Gongwer News Service - October 25, 2005

Gongwer News Service

A Senate panel heard another measure aimed at curbing “predatory lending” practices Tuesday and planned to field further testimony next week on the subject, boosting the hopes of housing advocates that the Legislature will take more steps to rein in unscrupulous lenders.

Senate Finance & Financial Institutions Chairman John Carey (R-Wellston), who has previously stressed the need to understand the laws on the books before making any hasty decisions on the subject, said after committee that he likely would move a bill eventually. “It’s going to take a while,” he added.

Advocates who have been lobbying the GOP-led Legislature for years to extend the Consumer Sales Practices Act to certain mortgage lenders took heart in the fact that the majority party is even considering enacting new laws in the area.

“I’m encouraged. I’m optimistic,” said Bill Faith, executive director of the Coalition on Homelessness and Housing in Ohio. He believes the momentum for change is building in both chambers as more and more lawmakers’ constituents report lending problems.

The realization is setting in, Mr. Faith said, that “current laws…are not providing sufficient tools to curb predatory lending.”

Attorney General Jim Petro agrees. In a presentation to the Senate Finance Committee Tuesday, Principal Assistant Attorney General Robert Hart made the case for extending the CSPA to certain lenders and noted the broadening of the AG’s oversight in the area that would occur under a proposal sponsored by Sen. Joy Padgett (R-Coshocton).

Following the presentation and sponsor testimony on a lending bill by Sen. Marc Dann (D-Liberty Twp.), Chairman Carey announced he would hold hearings next week on Sen. Padgett’s bill, which would extend CSPA protection to non-bank lenders, and a measure (SB 162) sponsored by Sen. Tom Roberts (D-Dayton) that goes further in several aspects and includes recommendations from the Predatory Lending Study Committee.

The hearing promises to be a forum for consumers with complaints over how their lives have been impacted by loans gone awry.

“This is a problem that is out of control,” Mr. Hart said. He noted: Ohio leads the nation in foreclosures per capita; 10.5% of “sub-prime” loans issued in the state – triple the national average – are in foreclosure; 59,000 foreclosures were filed in Ohio during last year alone.

Ohio’s dubious standing – 31 of 57 sheriffs surveyed in a Policy Matters Ohio report cited predatory lending as the leading cause of the foreclosure increase – worsened despite an improving economy, Mr. Hart said. The trend suggests “there were other forces at play” besides economic ones.

Mr. Hart cited studies in North Carolina and Pennsylvania that dispute the argument that strengthening lending laws unduly restricts credit opportunities for the poor or those with troubled credit histories that often receive “sub-prime” loans.

He also addressed the industry’s contention that the oversight by the Department of Commerce is sufficient, noting there are other examples in state law – auto dealers and skilled trades in particular – in which the CSPA is enforced along with other regulatory schemes. “We believe there is a distinction to be drawn between regulation and enforcement,” Mr. Hart said.

Sen. Dann said his bill would provide a quick response to the issue because it isn’t as broad as other proposals currently under consideration. The bill removes the CSPA exemption for “dealers in intangibles,” or non-bank mortgage lenders, and eliminates the public records exemption for complaints against mortgage brokers filed with
DOC, he explained.

“Predatory lending has been permitted to grow far too long here in Ohio,” Sen. Dann said. The bill would bring Ohio in line with the 48 other states that regulate DITs under consumer protection laws.

The sponsor said the removal of the public records exemption “will allow consumers choice” by freeing up more information about brokers. Responding to a question from the chair, Sen. Dann said his bill would not apply to state-chartered banks.

The Department of Commerce was also to testify in regards to its regulatory oversight, but decided to wait and further discuss policy proposals with Governor Bob Taft, who has been in Europe on a trade mission.

Sen. Ray Miller (D-Columbus) suggested the agency was purposefully avoiding the committee because of Mr. Taft’s recent request for Controlling Board approval of $1.5 million in funds to hire 14 staff members to better implement mortgage lending laws.

“I’m surprised they wouldn’t want to come in here and testify as to why that is needed,” Sen. Miller said, adding the money might be better served going to the AG’s office for enforcement purposes. “I think they’re running from the potential questions that might come from this committee.”

Commerce Director Doug White bristled at the suggestion that the agency was ducking the committee. “We’re not afraid at all,” he said. Commerce will testify on its efforts in regards to current laws (HB386, SB 76, 124th General Assembly), as well as issues involving the proposed expansion of the CSPA, once the information is compiled and the governor is briefed.

“We are taking (staff) information and putting together a presentation to the governor,” Mr. White said, adding that Mr. Taft and the Legislature “will craft the public policy,” not the department. The agency also planned to meet with the attorney general’s office, he said. “Our job is to give the governor and the attorney general information on what is possible.”

Mr. White said he has no opinion on the CSPA issue, but said there are some complications involved when the regulatory scheme shifts from a focus on criminal fraud to broader offenses.

As to current law, Mr. White said Commerce has licensed 29,000 brokers since 2002 and has conducted hundreds of presentations as part of an educational campaign to help consumers avoid lending traps. “We are executing the public policy of House Bill 386 and Senate Bill 76,” he said.

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