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Article published Apr 3, 2003
House approves measure to halt predatory lending

AMY GEIER EDGAR
Associated Press

COLUMBIA -- The House on Wednesday gave key approval to a bill that would protect consumers from high-interest loans and other controversial lending practices.
The bill defines high cost loans and prohibits certain provisions on these loans such as interest increases or balloon payments. It also requires brokers to disclose to the borrower how much brokers are earning in profits and recommends consumer credit counseling over a 5-day period.
Consumer advocates say the bill protects people and their homes.
"Maintaining and preserving one's home is the most important thing that can happen to a family, other than making sure the health and well-being of your loved ones is secure," said Sue Berkowitz, director of the South Carolina Appleseed Legal Justice Center in Columbia.
"Getting a predatory lending law in place will maintain home ownership and help people keep the American dream without allowing them to get into abusive loan terms," said Berkowitz, who has worked on the legislation since 1999.
The Senate passed its version of the bill last week. One major difference in the House version is the omission of mandatory credit counseling for someone seeking a high cost loan.
Jane Wiley, legislative director for the South Carolina AARP, said she hopes mandatory credit counseling will be added when lawmakers from the Senate and House hash out the differences in a conference committee.
"It's so important to AARP because of older borrowers being taken advantage of, especially in refinancing for home improvement loans," Wiley said.
She also prefers the Senate version when it comes to "flipping." That's the practice of repeatedly refinancing loans to generate surcharges for lenders.
Flipping is different than standard refinancing that helps consumers by allowing them to take advantage of lower interest rates.
Under the Senate-approved legislation, loans could be flipped every four years. In the House, loans could be flipped every three years.
"Sometimes you don't discover that you're really in a bad loan until about three years into it," said Wiley, who applauded House members for a provision that puts a fiduciary duty upon the mortgage broker.
A banker, for example, has a fiduciary duty. That means he or she is responsible for taking the consumer's best interest into account.
"To have a mortgage broker make sure the consumer gets the best deal, that's a giant step. Right now the mortgage brokers, although many of them perform a valuable service, really are in it in a profit-making mode," Wiley said.