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Treasury's Efforts to Stop Predatory Lending
The U.S. Department of Treasury is on a campaign to put a stop to predatory lending. In her address to the Women in Housing and Finance's Fall Symposium, Treasury Assistant Secretary Sheila Blair announced several initiatives.
Education of consumers is a priority to enable consumers to better protect themselves. Blair recommended that the government take a leadership role in educational efforts. She specifically mentioned that the Community Development Financial Institutions Fund is increasingly building financial literacy programs into its award-making process. Although she did not mention the FDIC's new consumer education program, "Money Smart," this is clearly the type of government effort she endorses. [Ed. Note: If you haven't done so already, check out the Money Smart program at FDIC's website, www.fdic.gov.]
Blair also encouraged the industry to develop "best practices" for prevention of abusive lending. Several entities, including Washington Mutual and the Mortgage Bankers Association, have already announced best practices. Other efforts to curb abusive lending include guidance and purchase standards from Fannie Mae, limiting points and fees and prepayment penalties, and prohibiting singly-premium credit life.
Finally, never overlook enforcement. Blair stated that the Federal Trade Commission is currently investigating several "high profile" cases that involve predatory lending. We can expect to hear more about these cases shortly.
In the same presentation, Blair announced the Treasury Department's interest in mortgage lending reform. She stated that "far-reaching reforms" are needed if the mortgage process is to become consumer-friendly. The focus of such reform would probably be based on changes to disclosures. Blair stated that "timely, clear and accurate cost disclosures" can provide consumers with a "first line of defense against unscrupulous lenders."
Copyright © 2001 Compliance Action. Originally appeared in Compliance Action, Vol. 6, No. 14, 12/01
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