Lawmakers should pass more effective predatory lending laws

Attempts to shield Tennessee consumers from unethical lending practices have languished in the General Assembly for five years. This week, the logjam could break if agreement can be reached on legislation targeting loan company tricks that rob borrowers of their homes.

Most Tennesseans have nothing to fear from most lenders who set up shop in the state and market their products. They should be concerned, however, about those who target less affluent property owners whose lack of familiarity with financial transactions could leave them vulnerable to sudden homelessness and dependence on an overtaxed social service network.

Large Tennessee banks and out-of-state mortgage firms have lobbied aggressively to defeat or modify legislation aimed at some of the most abusive practices.

One measure scheduled for the House Commerce Committee on Wednesday would restrict the use of balloon payments that can trigger an eventual foreclosure on high-interest loans, do away with prepayment fees and penalties, limit the financing of points and fees and otherwise rein in underhanded practices.

Whatever emerges from ongoing talks on proposed legislation also should prohibit high-cost loans from being made without third-party counseling on the transaction.

An effective predatory lending law also must include significant sanctions against violators and a commitment by the state to use them.

Tennessee shouldn’t pass up this chance to enact a predatory lending bill with teeth.