Scare tactics vs. facts on predatory lending bill

Friday, March 17, 2006

The people reading the papers don’t seem to know. The broadcasters don’t seem to know. Even some lenders don’t seem know. That lack of understanding is what the representatives of banks, lenders and brokers are counting on to repeal Montgomery County Council Ordinance 36-04.

This ordinance is an anti-discrimination measure and not an anti-predatory lending law. The Equal Rights Center understands. The Center for Responsible Lending understands. The National Fair Housing Alliance understands. The outcry against the ordinance and the effort to start a panic against it are familiar tactics. How often in the past did respectable folks, even mainstream politicians, oppose a civil rights measure because they thought it would be bad for business? This is not new.

The argument was dead wrong in the past and it is dead wrong now. It is embarrassing to the Equal Rights Center and its allies in the civil rights movement that in 2006 members of the Montgomery County Council would buy this retrogressive argument. It is time to stop and take a breath and consider the truth. Let’s get the facts straight.

A lender gives outrageous terms to a qualified borrower only because that borrower is African American or Latino or a Muslim or a single woman with children. As a result of the excessive terms and conditions the victim of the illegal discrimination loses one’s house, suffering terribly from the humiliation of it all, the fear it engenders, the pain it produces. These are experiences victims of discrimination know only too well.

In such instances, before the passage of 36-04, $5,000 was the maximum dollar amount in damages that could be levied for such victimization. The Equal Rights Center believes that $5,000 does not send a message. Now the penalty for such violations under 36-04 can reach $500,000. Facing potential damages of $500,000 is much more likely to deter lenders from engaging in lending discrimination in this county. That is how it should be. In federal law there is no limit to these damages. The market for making sub-prime loans has not dried up. Other communities such as Seattle, Fairfax County, Va., and Washington, D.C., place no cap on the amount of damages that may be awarded in similar cases. Lots of lenders remain in those jurisdictions, continue to offer sub-prime loans and are doing well.

Yes, this ordinance is an attention grabber and it is scaring some lenders. However most lenders in the county will remain and thrive as they continue to do business here with folks who require sub-prime loans. A small percentage of lenders will leave. Perhaps they will leave because they don’t quite understand the ordinance or perhaps out of fear that they might violate it.

Scare tactics are geared to make Montgomery County residents think that folks who need a sub-prime loan may no longer be able to get one. Scare tactics will try to convince people here that Montgomery County is anti-business. The promoters of scare tactics want people to look away from what the ordinance really says and does. If folks don’t look too closely maybe lending discrimination will go back to being treated with a slap on the wrist.

As it stands the federal Fair Housing Act and the Equal Credit Opportunity Act are not sufficient to bring a halt to lending discrimination. These national laws require reinforcement in local jurisdictions that will generate greater use of local enforcement assets to protect civil rights in lending. Montgomery County changed its previously very weak measure into a powerful piece of legislation for civil rights and that should be supported.

Local fair housing ordinances are common. They provide a basis for local governments to vigorously engage in civil rights enforcement. They send a message to everyone in the jurisdiction that people are welcome regardless of race, national origin, religion, familial status, disability and more. 36-04 says we want a diverse population in which all residents are treated fairly and justly.

Everything that is illegal under 36-04 was already illegal under the county’s previous fair housing law and under federal law. The difference is that now the county’s law has teeth that serve to discourage lending discrimination. Montgomery County residents should therefore demand from their political leadership that it stand tall and unflinching for civil rights and give its strong and unflinching support to ordinance 36-04.

Rabbi Bruce E. Kahn of Silver Spring is executive director of the Equal Rights Center, a private, not-for-profit, civil rights agency based in Washington, D.C.