In his 20 years at the Blackstone Valley Community Action Program, Paul Redkovich has witnessed it enough to consider it a “serious problem.”
A new immigrant to the country, oftentimes unable to qualify for a conventional loan, is looking for a way to purchase a home. And just when that goal seems unattainable, a knock at the door comes bearing a mortgage to help bring the dream to life.
But all too often, Redkovich said, that loan is deceptive, coming with high interest rates and hidden fees. And sometimes the borrower is financially destroyed, when all along he or she assumed they were getting a fair deal.
“Some people are so desperate to own their own home they are willing to do almost anything or go to almost anyone to get the loan,” said Redkovich, who currently serves as the housing development assistant for the community action program.
Redkovich’s comments came at a meeting in Pawtucket this month of the Special Legislative Commission to Study Predatory Lending Practices. The 13-member board, created by the General Assembly, aims to highlight concerns about predatory lending, a term generally applied to immoral lending practices that prey on vulnerable people, such as the elderly or new immigrants.
Through the testimonies of experts and constituents, the commission will report its findings to the state Legislature, possibly helping to craft legislation that can curb predatory lending practices.
“Rhode Island does not have those … measures for consumers to be protected from these kinds of abuses,” said Sen. Juan Pichardo, D-Providence, who chairs the special commission.
The commission has traveled around the state since May hoping to get a different perspective from each community. Aside from the stop in Pawtucket this month, the commission has received input from communities including Providence and Woonsocket.
A final meeting will be held in Providence in December. Pichardo hopes to submit and pass legislation during the General Assembly’s next session.
One state that has had experience with legislation prohibiting predatory lending is New Mexico, which in 2003 passed the Home Loan Protection Act. Aside from barring the practices, the legislation also provides civil remedies and enforcement provisions.
Former New Mexico Sen. Don Kidd, the bill’s co-sponsor and a banker for 48 years, told the commission this month that the bill first met widespread opposition from real estate firms who claimed that market would be destroyed.
Since the time the bill has passed, Kidd has witnessed few effects on legitimate businesses, he said. Instead, what he has noticed is that many of the fly-by-night operations designed to scam people have closed their offices.
In Rhode Island, at least one lending group is supporting similar legislation.
Mary Ann Clancy, senior vice president and general counsel for the Rhode Island Credit Union League, said her organization condemns predatory practices, which include excessive pre-payment penalties, unilaterally accelerating a borrower’s indebtedness, failing to disclose the risks of a high-cost mortgage and recklessly disregarding a borrower’s ability to re-pay a loan.
“The League believes that even a single occurrence of any such activity in Rhode Island justifies the mission of this commission,” Clancy said.
But she urged lawmakers to be careful when drafting legislation, which the League hopes will not hamper the legitimate lenders currently operating in the state.
“Balancing these critical public policy goals is a challenge for this commission, the Rhode Island General Assembly, the banking division of the R.I. Department of Business Regulation and the industry in a collaborative effort,” Clancy said in remarks prepared for the commission.
Clancy submitted to the commission a copy of national credit union lending standards and ethical guidelines, which call for education of members and borrowers, meeting the borrower’s needs and the prohibition of predatory practices.
