Fed takes action to protect consumers from predatory lenders

WASHINGTON – The Federal Reserve approved updated Reg Z regulations on the federal Home Ownership Equity Protection Act (HOEPA) that will help address the problem of predatory lending. The Fed’s rule to the provisions of Truth in Lending that implement HOEPA broadens the scope of mortgage loans subject to HOEPA by adjusting the price triggers used to determine coverage under the act. The rate-based trigger will be lowered by two percentage points, and the fee-based trigger will be revised to include optional insurance premiums and similar credit protection products paid at closing. In addition, certain acts and practices in connection with home-secured loans would be prohibited, including rules to restrict creditors from engaging in repeated refinancing of their own HOEPA loans over a short period of time when the transactions are not in the borrower’s interest. Mary Dunn, CUNA’s Associate General Counsel for Regulatory Advocacy said the trade association was pleased that the Fed’s action “was consistent with the ethical guidelines developed by CUNA along with CUNA Mutual Group.” In addition to emphasizing that credit unions are not predatory lenders, the guidelines include among their elements a hard line against the financing of credit insurance premiums over the life of the loan. CUNA Assistant General Counsel Jeffrey Bloch called this practice “one of the most abusive type of predatory lending practices.” Dunn said the Fed’s actions against predatory lending have been a long time coming. “It’s taken them awhile to make these changes to address predatory lending. The Fed was under pressure from many groups and congressional members to address predatory lending without being onerous to lenders.”