Efforts expand in Michigan to fight predatory lending

LANSING, Mich. – What Patrick La Pine of the Michigan Credit Union League described as a “flurry” of bills aimed at predatory lending has been introduced in the Michigan legislature the past couple of weeks. While supporting those bills, the Michigan Credit Union League is also working to educate lawmakers about the difference between “predatory” and “subprime” lending. La Pine, the league’s director of governmental affairs, says much of that proposed legislation is expected to be passed early next year. “The Michigan legislature is really stepping up to see what they can do to curb the bad actors on a statewide basis. We’re working very cooperatively with them,” he noted. La Pine believes there’s a lot of support in Michigan and in Lansing to put predatory lenders out of business. For example, proposed rules just passed by the state Senate Banking and Financial Institutions Committee would give regulators greater power to make certain bad actors don’t continue to resurface. He cited the possibility that, without such legislation, someone ordered to shut down a predatory lending operation could reopen a banned company under a different name, name their spouse as head of the new firm, and go back to business as usual. La Pine pointed out to lawmakers the league supports such bills because credit unions don’t engage in predatory lending. However, he is concerned the word “predatory” is intermingled with “subprime.” Not all subprime loans are predatory, he emphasizes. “Credit unions have many, many really good subprime programs to enable members to buy a home, for example. There are members with a bad credit history, or no credit history at all, who just don’t qualify for the prime rate,” he said “One example of a program I’ve heard of at one credit union offers a subprime loan rate for the first year, the first 12 payments. If the member makes the payments on time, the loan then goes down to the prime rate,” La Pine said. La Pine suggested one driving force behind the proposed legislation in Lansing is a proactive approach launched in Detroit against predatory lending. The MCUL is also gearing up to become part of that effort. The “Don’t Borrow Trouble” program is backed by Freddie Mac and in Detroit is getting support from groups such as the Detroit NAACP, the Michigan State Housing Development Authority, and the Detroit Alliance for Fair Banking. U.S. Senator Debbie Stabenow (D-Mich.) is also lending her support. “We’re in the process of getting information from the Don’t Borrow Trouble coalition, and I expect the Michigan Credit Union League will be participating in at least one of two ways,” La Pine said. He explained that, “The first way is financially, giving money to the campaign to help with media such as billboards and radio ads. I’ve spoken with the president of our association, Dave Adams, and I believe this is something we will be willing to do. They second thing is to find out what we can do to help with the referral service” That service involves counseling borrowers who want to determine if the loan terms they are considering are reasonable or not. Just as legislation is being proposed in Lansing, the Detroit City Council is also considering an ordinance that would mandate that lenders doing business in Detroit would have to pledge not to engage in predatory practices. Political observers figure council members who soon face reelection would like to have such a popular bill passed before the end of the year. While supporting Don’t Borrow Trouble, La Pine indicated the MCUL favors a state-wide approach instead of a hodgepodge of local legislation. “I think the best approach would be for the state to pass a law covering the whole state. You don’t want Detroit doing something, Ann Arbor something different, Flint still something else,” he said “I understand them (Detroit lawmakers) saying, `The state hasn’t done anything, so we’re going to take the bull by the horns.’ But I don’t think that’s the best approach,” said La Pine. -