Sen. Lauch Faircloth was set to introduce legislation Sept. 11 that he said would protect his constituents from "sham" lenders peddling unsolicited loan checks that carry "sky-high" interest rates.
However, the North Carolina Republican backed off at the last minute when he realized that home-state banking giant First Union Corp. will soon acquire roughly $1 billion in unsolicited loans as part of its purchase of Signet Banking Corp., Richmond, Va.
Sen. Faircloth decided not to join Sen. Richard Bryan, D-Nev., in sponsoring the bill after contacting bank officials in Charlotte to get their thoughts on the plan. "He didn't want to do anything that would put a cloud over Signet's banking practices while the merger was pending," an aide to Sen. Faircloth confirmed.
First Union officials said they oppose the bill, but not because of Signet's unsolicited loan portfolio.
"Congress doesn't need to be in this kind of micro-management of products and services," said a First Union spokeswoman.
Sen. Faircloth said he still may co-sponsor the legislation and plans to hold a hearing on the issue next month. On Tuesday Sen. Faircloth asked the General Accounting Office to identify which institutions make unsolicited loans or home equity loans at 125% of value. He also asked the watchdog agency to find out how many of these two types of loans are outstanding and what losses they have generated.
The legislation is identical to a measure introduced in June by Reps. Henry Gonzalez, D-Tex., and Maurice Hinchey, D-N.Y. Under that bill, consumers would not be liable for any debt created by the checks unless the lender could prove people were aware of the terms and that they, not an imposter, received the cash. Also, lenders would be prohibited from reporting data on the loans to credit bureaus.
After six months of delay, Senate Banking Committee Republicans may be close to a deal on legislation that would automatically cancel private mortgage insurance.
Senate Banking Committee staff members said Chairman Alfonse M. D'Amato will soon have an agreement with Sens. Faircloth, Connie Mack of Florida, and Richard Shelby of Alabama, who have blocked legislation introduced in March.
Sen. D'Amato's plan would require lenders to cancel mortgage insurance automatically when equity in a home reaches 20%. Fellow Republicans balked, forcing Sen. D'Amato to cancel a March 17 vote on the measure. Some pushed instead for a bill that would require lenders simply to notify borrowers when insurance may be canceled.
The main industry group lobbying to weaken the bill has been the Mortgage Insurance Companies of America.
Sources familiar with the negotiations said the compromise will require automatic cancellation, but at a higher equity percentage. Lawmakers are still haggling over the exact number, said one source.
Big GOP donors will have a chance to weigh in on financial reform tonight when the National Republican Congressional Committee hosts a dinner featuring House Commerce Committee Chairman Thomas Bliley and other members of his panel.
Up to 200 donors belonging to the party's Congressional Forum are expected to attend. A two-year membership in the Forum carries a hefty price tag: $15,000 for individuals and political action committees; $25,000 for corporations.
An GOP spokeswoman wouldn't say who has signed up to attend the fete, which begins at 6:30 pm. at the Capitol Hill Club.