Ohio AG Petro Testifies For Consumer Protection Law Against Predatory Lending

Ohio AG Petro Testifies For Consumer Protection Law Against Predatory Lending

March 27, 2006 -- COLUMBUS - Testifying today on Senate Bill 185, Attorney General Jim Petro said he supports adding to Ohio’s consumer protection statute provisions to quell predatory lending practices, including allowing the Attorney General’s Office to investigate and exercise consumer protection authority for home buyers victimized by shady lenders. Petro said he supports including in SB 185, the Homebuyers’ Protection Act, language subjecting mortgage brokers and non-bank mortgage lenders, as well as previously unregulated affiliates of banks, to the state Consumer Sales Practices Act (CSPA). He said such changes would help protect homeowners by allowing the Attorney General to investigate and issue subpoenas and file lawsuits when patterns and practices of unfairness, deception, or unconscionable behavior are discovered.

“Too often, consumers are steered into high-cost, high-interest loans they do not need and cannot afford, and in the end, foreclosure is their only option,” Petro said. “At a time when home buying and mortgage refinancing has been at an all time high, state regulators need to ensure the highest standard of conduct is being met by the lending industry. We are grateful to Sen. Padgett for her diligent efforts in crafting legislation that will go a long way toward addressing this problem in our state.”

The CSPA states that a supplier’s conduct in providing a consumer product or service is “unfair, deceptive, or unconscionable” when the supplier takes advantage of consumers’ inability to reasonably protect their interests, has knowledge at the time of a transaction that consumers would not receive a substantial benefit, or has knowledge at the time of a transaction that there was no reasonable probability of payment of the obligation in full by the consumer.

Petro said these practices can be characteristic of predatory lending, yet state law does not provide the Attorney General investigative authority under the CSPA when a consumer is misled by a lender or broker in the purchase of a home. Nearly every other state in the U.S. covers the banking or lending industry in its state “unfair and deceptive acts and practices” (UDAP) laws.

“Ohio’s CSPA has proven to be a fair and effective regulatory scheme in providing protection for Ohio consumers and demonstrating marketplace flexibility for Ohio businesses,” Petro said. “It will be better for consumers if it covers brokers and non-bank lenders who engage in predatory lending.”

The Attorney General also supports including in SB 185 provisions requiring appraiser licensure; national background checks for brokers, appraisers, and loan officers; and clarification of criminal enforcement authority for the Attorney General and local prosecutors.