Some Iowa legislators are targeting lenders who change outrageous fees and interest rates (typically higher than 12 percent annually).
A handful of bills in the Iowa General Assembly have been or are about to be introduced, and some might have a decent chance of passage.
"It's going to be difficult," said Tyler Uetz, predatory-lending organizer for Iowa Citizens for Community Improvement (CCI). "We can get something through. It's not going to be everything CCI wants."
At least three legislators have targeted predatory home loans, but Uetz said the most modest bill is the one with the best chance of passage. Representatives Greg Hoversten and Ed Fallon have introduced bills with restrictions that kick in when interest rates reach a certain level above the prime rate, but soon-to-be-introduced legislation by Frank Chiodo is more likely to get through the House and Senate.
"It deals with the worst forms of predatory lending," Uetz said. That bill, for example, would make illegal practices such as negative amortization (in which payments don't even cover interest, so the amount owed on the loan grows with time) and upselling (in which a person who is eligible for a lower-interest loan is steered toward a higher-rate loan). Chiodo could introduce the bill this week.
Uetz also said that the legislature might make it illegal to "flip" - refinancing a loan with no financial benefit to the borrower. "They're just very common sense," he said.
More stringent restrictions on lenders are unlikely because the banking industry opposes them, Uetz added.
Senator Joe Bolkcom is also targeting predatory lending, but in a different form. He introduced a bill January 31 that would restrict the fees and interest that lenders can charge for "payday" or "delayed-deposit" loans, those in which borrowers are charged exorbitant interest (often an annual rate of several hundred percent) for short-term loans.
The industry has grown significantly in recent years, with 30 payday-loan stores opening in Iowa in the first nine months of 2001 and 140 in the state overall. Bolkcom said that while different companies are competing with each other, "they're not competing on price."
Bolkcom is not optimistic, though, that his bill will get through. "I think it's an uphill battle," he said. "I'm hopeful we can at least get some debate in committee."
He added that he's not interested in putting these stores out-of-business: "I think these companies can still make a good earning without fleecing Iowans."
"It's going to be difficult," said Tyler Uetz, predatory-lending organizer for Iowa Citizens for Community Improvement (CCI). "We can get something through. It's not going to be everything CCI wants."
At least three legislators have targeted predatory home loans, but Uetz said the most modest bill is the one with the best chance of passage. Representatives Greg Hoversten and Ed Fallon have introduced bills with restrictions that kick in when interest rates reach a certain level above the prime rate, but soon-to-be-introduced legislation by Frank Chiodo is more likely to get through the House and Senate.
"It deals with the worst forms of predatory lending," Uetz said. That bill, for example, would make illegal practices such as negative amortization (in which payments don't even cover interest, so the amount owed on the loan grows with time) and upselling (in which a person who is eligible for a lower-interest loan is steered toward a higher-rate loan). Chiodo could introduce the bill this week.
Uetz also said that the legislature might make it illegal to "flip" - refinancing a loan with no financial benefit to the borrower. "They're just very common sense," he said.
More stringent restrictions on lenders are unlikely because the banking industry opposes them, Uetz added.
Senator Joe Bolkcom is also targeting predatory lending, but in a different form. He introduced a bill January 31 that would restrict the fees and interest that lenders can charge for "payday" or "delayed-deposit" loans, those in which borrowers are charged exorbitant interest (often an annual rate of several hundred percent) for short-term loans.
The industry has grown significantly in recent years, with 30 payday-loan stores opening in Iowa in the first nine months of 2001 and 140 in the state overall. Bolkcom said that while different companies are competing with each other, "they're not competing on price."
Bolkcom is not optimistic, though, that his bill will get through. "I think it's an uphill battle," he said. "I'm hopeful we can at least get some debate in committee."
He added that he's not interested in putting these stores out-of-business: "I think these companies can still make a good earning without fleecing Iowans."
