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Predatory Loan Law May Be Blocked;
Consumer Advocates Fear Proposed Statewide Moratorium May Kill Oakland Ordinance
By Steve Geissinger
August 22, 2002
The consumer loan industry, perhaps aided by an East Bay lawmaker, is planning an 11th-hour legislative push for a moratorium on local anti-predatory lending measures, threatening Oakland's landmark ordinance, consumer groups warned Wednesday.
Consumers Union and other advocacy groups said the effort in the waning days of the [legislative session could kill the Oakland or]dinance or disadvantage Oakland in other ways.
Representatives of the California Financial Services Association, which represents much of the subprime or higher-cost loan industry, serving consumers who pose a greater financial risk, did not immediately return phone calls to comment.
Perata received contributions
Sen. Don Perata, an Oakland Democrat who has received campaign contributions from the consumer lending industry, also did not return calls requesting comment. A spokesman said he could "not confirm or deny" that the lawmaker planned to sponsor the measure.
However, Consumers Union, the Association of Community Organizations for Reform Now and the American Association of Retired Persons said they had an appointment to meet with Perata today to discuss a compromise in which they might back a moratorium that did not threaten Oakland's ordinance in exchange for adding new consumer protections to the bill.
"We oppose any moratorium on local anti-predatory lending ordinances unless and until we have a much stronger state law that provides a more thorough set of consumer protections," Garcia said in a letter to lawmakers, who are working toward the scheduled Aug. 31 conclusion to their annual session.
"Predatory lending is devastating some of our neighborhoods, particularly low-income communities and communities of color," Garcia said. "Hard working families are losing their homes."
Consumer lenders reportedly have said that as part of a deal in which the state adopted some anti-predatory lending protections last year, consumer groups informally agreed to cease pushing local ordinances during assessment of the statewide law.
The loan industry says consumer advocates broke that promise -- a commitment consumer advocates say they never made.
As a result, lenders apparently are pressing ahead with plans to impose a moratorium on local ordinances.
Ameriquest Mortgage Co., an Irvine-based subprime lender, contributed $10,000 to Perata's campaign coffers in October 2001, the same month that the California Financial Services Association gave him $1,000.
"Perata's bill could jeopardize Oakland's recently adopted predatory lending measure, which is now being challenged in court, and a pending measure now before the Los Angeles City Council," said Gail Hillebrand of Consumers Union.
Though Oakland's ordinance was upheld as constitutional in Alameda County Superior Court in June, it remains stayed while the case is under appeal to a higher court. The consumer loan industry is arguing that the local ordinance conflicts with state law.
According to the ordinance, lenders have to consider a borrower's ability to repay the loan before they service the customer. It also says that no lender can make a high-cost home loan without making sure the client either receives counseling from a third-party credit counselor or waives such a session.
The law is stricter than statewide legislation that went into effect Jan. 1. Consumer advocates say it provides only modest protections against financially distressed homeowners being lured into taking out high-interest loans they can't afford and losing their homes.
'Big problem for Oakland'
Even if Perata successfully shielded the Oakland ordinance by including language in the moratorium that makes it clear state law does not pre-empt the local law, "it still leaves a big problem for Oakland, basically setting it up as an island," said Lupe De La Cruz of the AARP.
"Therefore, it would be subject to all the litigation attacks on its own," he said.
Moreover, said De La Cruz, lenders -- even those favored by consumer groups -- could also decide to pull out of the Oakland market.
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