WASHINGTON - Thomas J. Curry is more Clark Kent than Superman, but Massachusetts' mild-mannered banking commissioner is determined to fight the lending industry's bad guys.

Mr. Curry and his counterparts in New York, North Carolina, and other states are leading a crackdown on lenders that take advantage of unsophisticated or desperate consumers with high rates, excessive fees, and outright fraud. While federal regulators debate and study the issue, state regulators are fining violators, yanking licenses, and adopting tough new standards.

In an interview this week, Mr. Curry, 43, readily acknowledges his reserved demeanor. "I can't help it; I'm a career government employee." But he also says he is passionate about protecting consumers and keeping the banking system in his state safe. "It's why I get up in the morning."

The slow pace of reform here does not concern him, but Mr. Curry is frustrated that federal regulators are undermining state laws. A survey of states, he says, shows that laws covering everything from reporting requirements for licensed lenders and limits on late fees to prohibitions on prepayment penalties and balloon mortgages are being preempted.

One big problem, he said, is the Alternative Mortgage Transaction Parity Act, which permits state-licensed lenders to comply with looser federal rules. "We don't think preemption should be broadly applied," said Mr. Curry, who also chairs the Conference of State Bank Supervisors.

Federal regulators should be required to notify state regulators when a consumer protection is being preempted, he said. The federal agency should also have to justify its action and explain how federal law adequately protects consumers or why protection is not necessary.

Why should mainstream bankers care?

"Predatory lending has the risk of damaging the reputation of the banking industry," Mr. Curry said. "If you talk to an average person on the street, to a consumer getting a mortgage or refinancing, he just says, 'I went to the bank.' They actually went to a nonbank financial entity, so even though that's not the business reality, it's a perception."

There are also regulatory and legislative risks. "How rules are modified or changed or definitions are established may bring traditional banking activities in or may lump banks in with other types of lenders," he said.

Predatory lending only surfaced as a "hot issue" here this year, long after the states began their attack. Mr. Curry issued his first decree in 1997: "Predatory lending is illegal in Massachusetts and will not be tolerated."

Today Mr. Curry will testify at a hearing in Boston organized by the Federal Reserve Board - the federal agency under the most pressure to act. The central bank announced plans July 10 to hold three hearings "on ways the board might use its rule-writing authority to curb predatory practices."

The Fed has been criticized for not using the considerable power Congress conferred in 1994 in the Home Ownership and Equity Protection Act, an amendment to the Truth in Lending Act. The law imposes conditions and limits on high-cost loans, which are defined as those with an annual percentage rate 10 points over Treasury securities with a similar maturity and with fees exceeding 8% of the loan total or $400, whichever is greater. Lawmakers gave the Fed authority to adjust these rate and fee triggers - a move the central bank is contemplating.

The Office of Thrift Supervision is also mulling a move against the loophole created by the Parity Act.

But while the Federal agencies think, states have already taken action. It is a pattern that's been repeated frequently; states are credited with creating a range of banking products as well as spurring Congress to allow interstate banking and branching.

North Carolina can take credit for enacting the first and, so far, only law against predatory lending. To avoid killing the subprime loan market, it limits but does not prohibit high-cost loans under $300,000. High cost is defined as 10 points above comparable Treasuries and fees exceeding 5% of the amount loaned. In addition to a variety of conditions, the law requires lenders to provide financial counseling and they must be confident the borrower can repay the loan. Refinancings that do not benefit the borrower are barred.

Violators may be forced to repay twice the interest paid.

New York is working on similar rules and going a step further to require underwriters securitizing subprime loans to make sure they are not funding loans that are based on the value of collateral rather than the ability to repay.

On Thursday, Mr. Curry moved to tighten his state's predatory lending rules. His 28-page proposal would expand the definition of high-cost loan and impose more conditions on the credits. Calling the federal thresholds "inadequate," Mr. Curry said a high-cost loan ought to be defined as 8 points over comparable Treasuries or fees totaling 5% of the loan or $400.

By yearend, he also wants to require two new disclosures, including a "12-point signature line disclosure advising the applicant to seek less costly financing alternatives." Mr. Curry's proposal is loaded with other changes designed to protect consumers from unscrupulous lenders. For example, the minimum term for mortgages with balloon payments would be extended by two years to seven years.

And no longer would lenders in Massachusetts have to be habitual predators to be snagged. "A single improper high-cost, collateral-based loan would constitute a prohibited act," according to the proposed rule.

All borrowers must be given a list of credit counseling agencies before the high-cost loan is closed; to avoid elderly people losing their homes, borrowers older than 60 years of age must complete a counseling program.

Penalties for violating these - and many other conditions - range from cease-and-desist orders to loss of license.

These rules will apply to all lenders operating in the state whether they hold state or national charters, because people deserve the same protections no matter where they get their loan, Mr. Curry said. (Congress gave states a chance to opt out of the Parity Act and Massachusetts is one of five states that did.)

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