Fed Cracking Down on Predatory Lending Practices

WASHINGTON–The Federal Reserve has indicated it is cracking down on financial service providers regarding certain lending practices in response to Congressional focus on this issue, but there is some question about whether the Fed has gone to far–or not far enough. “Credit unions have a special interest in serving their members and making provident credit,” said Carrie Hunt, NAFCU’s senior counsel/director of public affairs. “Dubious predatory practices do not serve this interest. NAFCU believes that the Fed does have a role in protecting consumers, but believes that this role can be fulfilled without increasing regulatory burden to credit unions.” Jeffrey Bloch, CUNA senior assistant general counsel, noted the Fed action was spurred by several congressional hearing on this topic. “Those hearings are focusing on possibly banning certain practices, such as universal default and certain methods for calculating interest rates on credit cards. By the way, we have taken a position in previous comment letters that would support banning of universal default,” Bloch said. “The Fed is taking another approach by proposing massive changes to the Reg Z/Truth in Lending Act with the goal of addressing loan disclosures, as opposed to banning certain practices.” But Bloch said this may not be enough for some in Congress who want to ban these practices. “We are actively involved in this rulemaking process, which bean in late ’04, to ensure credit union concerns are fully considered,” Bloch said. “We have written two comment letters so far in response to prior requests for comments on these issues. “After ‘open-end,’ the Fed will turn to ‘closed-end,’” Bloch continued,” which primarily includes mortgage loans, car loans and other loans that have fixed payment and payment periods.”