Making It Easy For Predators
March 15, 2002
Ohio ?Takes Away Cities? Rights To Protect Their Citizens? From Unscrupulous Lenders
By Bridget McCrea
Inman News Features
Ohio?s new predatory lending law is supposed to protect vulnerable citizens from being victimized by unscrupulous lenders, but the legislation signed late last month by Gov. Bob Taft has some consumer groups reeling.
The new law requires lenders to disclose upfront how much is being borrowed over the life of the loan, outlines 12 unfair terms and conditions that are strictly prohibited and allows borrowers to cancel certain loans within three days without penalty.
But the law also prohibits local governments and municipalities from enacting their own anti-predatory legislation?and consumer advocates say that aspect is detrimental for borrowers.
"This bill is an incredibly weak attempt to offer new protections to Ohio homeowners," said Rick Taylor, managing director of the Columbus, Ohio-based Coalition on Homelessness and Housing.
Taylor said the bill would have made more sense if it had been based on existing statewide consumer protections, but as it stands, that?s not the case.
"Without those pre-existing, strong laws, the state is cutting off local communities at the knees," he charged.
Taylor said the bill should have provided a balance between the needs of legitimate sub-prime lenders who don?t want to navigate the individual laws of Ohio?s more than 250 municipalities and the need to protect consumers from predatory lenders.
"If everyone had a different set of rules, it would make no sense at all," said Taylor. "Giving the state the final say when it comes to regulating this industry isn?t entirely bad, but we must ensure that the laws we have on the books are sufficiently protecting people, and they?re not."
On the positive side, Taylor said, the new bill has raised public awareness of predatory lending.
"The issue of predatory lending has been raised pretty significantly in the state, where several large daily papers editorialized on it, calling for more to be done," said Taylor.
The coalition has been appointed to a task force that will study the issue, then report its findings to the legislature by July 2003.
But Taylor isn?t impressed by the study. "If you want an issue to go away," he said, "you study it."
Joining the coalition on the task force will be AARP, which has its own complaints about the the new law.
Asked whether such laws protect consumers, Kathy Keller, communications representative for AARP?s Columbus office, flatly said: "The one in Ohio certainly doesn?t."
Keller said the bill lacks teeth because it simply takes the Homeowners Protection Act and codifies it as state law.
"Only 1 percent of loans even fall under that act, so what they?ve done here is useless," she said. "The whole point of passing it was just to prevent cities from passing stronger legislation."
The city of Dayton was considering its own predatory lending law until lawmakers heard about the state bill, according to Keller, who said the city of Cleveland then passed the very law Dayton had been considering.
"Dayton and Cleveland plan to fight the (state) bill all the way to the Ohio Supreme Court because it doesn?t add any new protections for homeowners," said Keller. "The bill did nothing but take away the rights of cities to protect their citizens."
Pennsylvania also has enacted a statewide predatory lending bill and North Carolina, New York, Massachusetts and the District of Columbia have enacted laws regulating sub-prime lending.
Keller said Georgia and California are considering similar moves.
But Steve Brown, president of the Ohio Association of Realtors, puts a positive spin on Ohio?s new law.
Brown, president of Irongate, Realtors, a five-office, 285-agent independent real estate brokerage in Dayton, said he?s seen plenty of consumers being preyed upon by predatory lenders.
But he still believes putting the state government in the operative position in place of local governments and municipalities is good news for the real estate business.
"Had this not gone through," Brown said, "any legitimate mortgage lender would have had to work through a patchwork of different ordinances in the various municipalities throughout Ohio."
Brown also sees the planned study as a positive development for consumers.
"The good thing about this bill is that it appointed a study group to see how this type of regulation actually works," he said. "That, combined with the ability to go back to strengthen and tighten some the regulations, is a great starting point."
Copyright: Inman News Service