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Committee on Financial Services

United States House of Representatives

Archive Press Releases

Committee on Banking
and Financial Services

James A. Leach, Chairman

For Immediate Release:
Wednesday, May 24, 2000

Leach Anti-Predatory Lending Precepts

It seems to this gentleman that there are certain basic precepts that should be considered as part of addressing predatory practices:

  • Consumers deserve meaningful and clearly understandable disclosures of loan agreements so that borrowers are informed, rather than confused, by all of the paperwork before them.
  • Lenders shall not extend credit to a borrower unless they have applied appropriate analysis to determine that the borrower is capable of repayment on the terms of the loan.
  • Lenders should not require a borrower to finance points and fees associated with a high-cost loan. The consumer should receive a clear disclosure that the financing of points and fees is optional.
  • A lender should not charge a borrower points or fees to renew, extend, or otherwise modify a high cost home loan, if after the modification the loan remains a high cost loan; or if it is no longer a high cost loan the APR has not been decreased by at least 1.5 percentage points.
  • Lenders shall not use misleading or deceptive sales and marketing practices that induce consumers to enter loan agreements that they cannot afford.
  • Attempts to curb abusive practices should not be made at the expense of credit availability in under-served neighborhoods.
  • Frequent refinancings, or "loan flipping," which unnecessarily increase the loan balance and eliminate equity should not be acceptable. Points and fees associated with refinancing of a high-cost loan should result in a net-benefit to the borrower.
  • Greater efforts should be undertaken to educate the public about borrowing. For example, consumers must be able to easily comprehend that a drop in their monthly payments may not translate into owing less over the long term, and may in fact increase their overall costs.
  • Lenders should provide disclosures, prior to closing, which encourage consumers to seek credit counseling.
  • Regulators should take necessary measures to ensure that an institution’s CRA rating does not improve as a result of loans that were made to low- and moderate-income individuals, but have predatory terms.
  • The secondary market should not be a facilitator of predatory lending, but should take measures to ensure that loans which contain predatory terms are not purchased.


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