WASHINGTON If you ask any lobbyist which groups get what they want in Washington, the American Association of Retired Persons would be among those at the top of the list.
That influence now could be at odds with the goals of banking industry officials who want to stop the enactment of overly restrictive laws against predatory lending, because the AARP has made it a priority agenda item.
AARP president Esther Tess Canja said the issue is an important one for her group: Older Americans are favorite targets for loan scams, because they are often equity-rich and cash-poor.
For older Americans the most abusive loans are often the refinancing and equity-based home modification loans, because they target the value of the home frequently the owners largest financial asset, she told the Senate Banking Committee last week during its hearings on predatory lending. Those forms of abusive lending are particularly devastating when the older homeowner is living on a modest or fixed income.
The AARP has launched an aggressive campaign to raise awareness among its members, and on the federal level Ms. Canja and company have a very specific agenda.
The AARP supports a Federal Reserve Board proposal to make more loans answer to the 1994 Home Ownership and Equity Protection Act, which subjects lenders making high-cost, home-secured loans to price limits and disclosure requirements.
It wants a lower annual percentage rate threshold that triggers that law, an expanded definition of points and fees that are calculated as part of a loans cost, and a prohibition on alterations to the terms of a loan after it is made. It also wants the Home Ownership and Equity Protection Act to be extended to include lines of credit and first-time mortgages.
Finally, the AARP believes borrowers should not have to establish that a lender has a pattern of unfair lending to seek redress under the act.
People lose their homes, and they had no idea that would happen to them, Ms. Canja said in making her case for legislative and regulatory change. Mortgage instruments are so complicated, theyre just sitting ducks, she said of her constituents.
She acknowledged that a definition of predatory lending has proved elusive, but AARP declares a predator to be any lender that takes advantage of a borrowers lack of information; prices the interest rate and fees beyond what can be justified by the credit risk of the borrower; manipulates the borrower into taking on an unaffordable loan; or defrauds the borrower.
Ms. Canja thinks Senate Banking Chairman Paul S. Sarbanes, D-Md., should wait for the Feds final rule before introducing legislation. Then she would like to see a bill that sets minimum federal standards such as prohibiting balloon payments, single-premium credit life insurance, and exorbitant prepayment penalties that state and local governments could add to, much like Gramm-Leach-Bliley Act permits them to enact tougher privacy laws.
Whether the group would support the financial services industrys bid for federal preemption depends on the contents of a final bill. She noted that the organization has strongly supported tough predatory lending laws adopted in North Carolina and Chicago, to name two places.
We need to get standards out there, Ms. Canja said, adding that if Congress passes a bill that is not to the AARPs liking, the group will continue to support states pursuing more vigorous laws.
Beyond legislation, the group is trying to inform its members and work with community groups.
In April it launched an educational initiative in California, New York, and Ohio three states that generate a high volume of complaints. The They Didnt Tell Me I Could Lose My Home campaign offers consumers a borrowers kit, a toll-free number, and a Web site.
The AARP is also strengthening its state legislative activities and trying to bolster its pro bono work (it has a limited number of lawyers who represent predatory lending victims for free).
Ms. Canja stresses that the organization recognizes the need for a strong subprime market she just wants to root out the bad actors.
AARPs efforts to address these problems are directed at improving credit market performance, not limiting consumer access to credit for those with a less-than-perfect credit history, she told the Senate Banking Committee.
Part of the campaign focuses on home repair and modification loans, she said. Many older adults need these types of loans but are now afraid to seek one for fear of being victimized, she said, and the AARP wants to help those people identify a predatory deal and find a better one.