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Philadelphia
Predatory Lending Task Force
“Helping to keep residents informed and protected” |
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PA
Legislature Predatory Lending Bill
HOUSE BILL 1280 P_N_ 1497 |
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| THE GENERAL ASSEMBLY OF PENNSYLVANIA HOUSE BILL No. 1280 Session of 2001 INTRODUCED BY WASHINGTON, KIRKLAND, J. WILLIAMS, THOMAS, CRUZ, MYERS, JAMES, HORSEY, WATERS, ROEBUCK, RIEGER, DONATUCCI, OLIVER, LEDERER, DeLUCA, KELLER, BUTKOVITZ, YOUNGBLOOD, PRESTON, M. COHEN, ROBINSON, VEON, DeWEESE, LESCOVITZ, BELFANTI, BISHOP, DALEY, FREEMAN, GEORGE, GRUCELA, HARHAI, HENNESSEY, JOSEPHS, MANN, SHANER, SOLOBAY, STEELMAN, TRELLO AND WALKO, APRIL 4, 2001 REFERRED TO COMMITTEE ON COMMERCE AND ECONOMIC DEVELOPMENT, APRIL 4, 2001 AN ACT 1 Prohibiting business entities and affiliates from making, 2 issuing or arranging subprime or high-cost loans or assisting 3 others in so doing in an abusive, unscrupulous or misleading 4 manner; providing for enforcement, for private right of 5 action, for education, outreach and counseling, for 6 Commonwealth depositories and investments and for penalties. 7 The General Assembly of the Commonwealth of Pennsylvania 8 hereby enacts as follows: 9 Section 1. 10 This act shall be known and may be cited as the Predatory 11 Lending Practices Law. 12 Section 2. Declaration of policy. 13 (a) Findings.--The General Assembly finds as follows: 14 (1) That citizens from many lower and moderate income 15 neighborhoods in this Commonwealth have been unable to access 16 legitimate financing for home purchases and renovations, 17 allowing predatory lenders to thrive. 1 (2) That these predatory lenders are charging exorbitant 2 fees and interest rates and are persuading citizens to incur 3 mortgage debt in excess of their needs or ability to pay, 4 often through fraudulent means. 5 (3) That these predatory lending practices appear to be 6 targeting elderly and other vulnerable borrowers. 7 (b) Intent.--It is the intent and purpose of this act: 8 (1) To protect the citizens of this Commonwealth and its 9 neighborhoods from lending practices which strip hard-earned 10 equity from citizens and contribute to the problem of vacant 11 and abandoned houses by making loans that families cannot 12 afford to repay. 13 (2) To collect and make available to the public 14 information necessary for residents to protect themselves 15 against predatory lending practices. 16 (3) To prevent lenders engaged in predatory lending and 17 those persons providing referrals and services to those 18 lenders from enjoying the privilege of doing business with 19 the Commonwealth. 20 (4) To prevent predatory lenders and those persons 21 providing referrals and services to those lenders from taking 22 advantage of government programs designed to encourage home 23 ownership and home repair. 24 Section 3. Definitions. 25 The following words and phrases when used in this act shall 26 have the meanings given to them in this section unless the 27 context clearly indicates otherwise: 28 "Affiliate." An entity that controls, is controlled by or is 29 under common control with another entity, including any 30 successors in interest or alter egos. 20010H1280B1497 - 2 - 1 "Business entity." An individual, domestic corporation, 2 foreign corporation, association, syndicate, joint stock 3 company, partnership, joint venture or unincorporated 4 association, including any parent company, subsidiary, exclusive 5 distributor or affiliated company, engaged in a business or 6 commercial enterprise. 7 "Commonwealth." The term includes Commonwealth agencies and 8 Commonwealth-related agencies. 9 "Commonwealth agency." The Commonwealth and its departments, 10 boards and commissions. 11 "Commonwealth-related agency." Authorities and quasi-public 12 corporations which either: 13 (1) receive appropriations from the Commonwealth; 14 (2) have entered into continuing contractual or 15 cooperative relationships with the Commonwealth; or 16 (3) operate under legal authority granted to them by the 17 Commonwealth. 18 "Community-based organization." A group affiliated with or 19 organized for the benefit of one or more communities or 20 neighborhoods, or a group organized to improve the quality of 21 life in a residential area. 22 "Department." The Department of Banking of the Commonwealth. 23 "High-cost lender." 24 (1) A business entity that through itself or an 25 affiliate has made, issued or arranged, or assisted others in 26 so doing, within any 12-month period, high-cost loans that 27 comprise either: 28 (i) 5% of the total annual number of loans made, 29 issued or arranged or 5% of the total annual number of 30 loans which the business entity has assisted others in 20010H1280B1497 - 3 - 1 making, issuing or arranging; or 2 (ii) ten individual loans, 3 whichever is less. 4 (2) The term does not include a business entity, or its 5 affiliates, that has submitted to the Department of Banking a 6 plan to discontinue the practice of making high-cost loans, 7 if: 8 (i) the plan ensures: 9 (A) the prompt disengagement from the practice 10 of making, issuing or arranging, or assisting others 11 in so making, issuing or arranging, high-cost loans 12 by the business entity and its affiliates; and 13 (B) the complete cessation of the making, 14 issuing or arranging, or assisting others in the 15 making, issuing or arranging, of high-cost loans by 16 the business entity and its affiliates within 90 days 17 after the plan is submitted; and 18 (ii) no more than one plan is submitted on behalf of 19 any business entity. 20 "High-cost loan." A loan that is secured by residential real 21 property located within this Commonwealth on which there is 22 situated a dwelling for not more than four families or a 23 condominium unit, or is secured by a cooperative unit within 24 this Commonwealth, if: 25 (1) at any time over the life of the loan, the annual 26 percentage rate of the loan equals or exceeds by more than 27 six and one-half percentage points in the case of a first 28 lien mortgage, or equals or exceeds by more than eight 29 percentage points in the case of a junior mortgage, the yield 30 on Treasury securities having comparable periods of maturity 20010H1280B1497 - 4 - 1 to the loan maturity as of the 15th day of the month 2 immediately preceding the month in which the application for 3 the extension of credit is received by the creditor; or 4 (2) the total points and fees equal or exceed: 5 (i) four percentage points of the total loan amount 6 less the amount of points and fees if the loan amount is 7 $16,000 or greater; or 8 (ii) $800 if the loan amount is less than $16,000. 9 The term does not include a loan that is made primarily for a 10 business purpose unrelated to the residential real property 11 securing the loan or a loan which exceeds $150,000. 12 "Person." The term includes a business entity that makes, 13 issues or arranges subprime or high-cost loans, assists others 14 in doing so, or that receives a fee or a direct or indirect 15 economic benefit from arranging such a loan, or provides 16 settlement services, as defined by the Real Estate Settlement 17 Procedures Act of 1974 (RESPA) (Public Law 93-533, 88 Stat. 18 1724, 12 U.S.C. § 2601 et seq.) pertaining to such a loan. 19 "Points and fees." 20 (1) The term includes: 21 (i) All items required to be disclosed under 12 CFR 22 226.4(a) and (b) (relating to finance charge) except the 23 interest rate or time-price differential. 24 (ii) Subject to the exclusions provided in this 25 section, all charges for items listed under 12 CFR 26 226.4(c)(7) but only if the lender receives direct or 27 indirect compensation in connection with the charge or 28 the charge is paid to an affiliate of the lender. 29 (iii) All compensation paid directly or indirectly 30 to a mortgage broker, including a broker that originates 20010H1280B1497 - 5 - 1 a loan in its own name in a tablefunded transaction not 2 otherwise included in paragraph (1) or (2). 3 (iv) The premium of any single premium credit life, 4 credit disability, credit unemployment or any other life 5 or health insurance that is financed directly or 6 indirectly into the loan. 7 (2) The term does not include any charges or fees 8 excluded under 12 CFR 226.4 (c) through (e), except that any 9 fees for preparing loan-related documents, such as deeds, 10 mortgages and reconveyance or settlement documents, are 11 included in the term. 12 "Predatory lender." 13 (1) A business entity that through itself or an 14 affiliate has, within any 12-month period, made, issued or 15 arranged, or assisted others in so doing, predatory loans 16 that comprise either: 17 (i) 5% of the total annual number of loans made, 18 issued or arranged or 5% of the total annual number of 19 loans which the business entity has assisted others in so 20 making, issuing or arranging; or 21 (ii) ten individual loans; 22 whichever is less. 23 (2) The term does not include a business entity or its 24 affiliates that have submitted to the Department of Banking a 25 plan to discontinue the practice of making predatory loans, 26 if: 27 (i) the plan ensures: 28 (A) the prompt disengagement from the practice 29 of making predatory loans by the financial 30 institution and its affiliates; 20010H1280B1497 - 6 - 1 (B) the complete cessation of the making of 2 predatory loans by the financial institution and its 3 affiliates within 90 days after the plan is 4 submitted; and 5 (ii) no more than one plan is submitted on behalf of 6 any financial institution. 7 "Predatory loan." A subprime or high-cost loan that was made 8 under circumstances that involve any of the following acts or 9 practices or contain any of the following loan terms: 10 (1) Fraudulent or deceptive acts or practices, including 11 fraudulent or deceptive marketing and sales efforts to sell 12 high-cost loans. 13 (2) Loan flipping. The making of a subprime or high- 14 cost loan to a borrower that refinances an existing loan 15 secured by residential property in this Commonwealth if any 16 of the following applies: 17 (i) more than 50% of the prior debt refinanced bears 18 a lower interest rate than the new loan; 19 (ii) the borrower's payment of prepaid finance 20 charges and closing costs reduces the interest rate such 21 that it will take more than five years for the borrower 22 to recoup the transaction costs; or 23 (iii) refinancing a special mortgage originated, 24 subsidized or guaranteed by or through a State, tribal or 25 local government or nonprofit organization which: 26 (A) bears a below-market interest rate; 27 (B) has nonstandard payment terms beneficial to 28 the borrower, such as payments that vary with income 29 or are limited to a percentage of income; or 30 (C) where no payments are required under 20010H1280B1497 - 7 - 1 specified conditions and, as a result of the 2 refinancing, the borrower will lose one or more of 3 the benefits of the special mortgage. 4 (3) Balloon payments. A loan which contains a scheduled 5 payment that is more than twice as large as the average of 6 earlier scheduled payments or which contains a provision that 7 gives the lender, in its sole discretion, the right to 8 accelerate the indebtedness in the absence of the default of 9 the borrower. 10 (4) Negative amortization. A loan which contains a 11 payment schedule with regular periodic payments that cause 12 the principal balance to increase. 13 (5) Excessive points and fees. The financing of points 14 and fees in excess of four percentage points of the total 15 loan amount less the amount of the points and fees if the 16 loan amount is $16,000 or greater, or $800 if the loan amount 17 is less than $16,000. 18 (6) Increased interest rate. A loan which contains a 19 provision that increases the interest rate after default. 20 Interest rate increases do not constitute a predatory loan 21 practice in a variable rate loan if: 22 (i) the increase is otherwise consistent with the 23 provisions of the loan documents; and 24 (ii) default or the acceleration of the indebtedness 25 does not trigger the change in the interest rate. 26 (7) Advance payments. A loan which includes terms under 27 which more than two periodic payments required under the loan 28 are consolidated and paid in advance from the loan proceeds 29 provided to the borrower. The term does not include a loan 30 issued by or guaranteed by the Commonwealth. 20010H1280B1497 - 8 - 1 (8) Modification or deferral fees. A loan which includes 2 terms 3 under which the lender may charge a borrower any fees or 4 other charges to modify, renew, extend or amend a loan product 5 or to defer any payment due under the terms of a loan product. 6 (9) Mandatory arbitration. A loan which contains a 7 mandatory arbitration clause that limits in any way the right 8 of the borrower to seek relief through a court of law or 9 equity. 10 (10) Prepayment penalties. A loan which imposes 11 prepayment fees or penalties. 12 (11) Financing of credit insurance. The financing of any 13 credit life, credit disability, credit unemployment or any 14 other life or health insurance, directly or indirectly, into 15 one or more high-cost loans. 16 (12) Lending without home loan counseling in violation 17 of section 4. 18 (13) Lending without due regard to repayment in 19 violation of section 4. 20 (14) Subprime loan. A loan that is secured by 21 residential real property located within this Commonwealth on 22 which there is situated a dwelling for not more than four 23 families or a condominium unit, or is secured by a 24 cooperative unit within this Commonwealth, if at any time 25 over the life of the loan, the annual percentage rate of the 26 loan exceeds by at least four and one-half percentage points, 27 but less than six and one-half percentage points, in the case 28 of a first lien mortgage, or by at least six and one-half 29 percentage points but less than eight percentage points, in 30 the case of a junior mortgage, the yield on Treasury 20010H1280B1497 - 9 - 1 securities having comparable periods of maturity to the loan 2 maturity as of the 15th day of the month immediately 3 preceding the month in which the application for the 4 extension of credit is received by the creditor. 5 Section 4. Predatory lending practices prohibited. 6 (a) Issuing predatory loans.-- 7 (1) No person shall make, issue or arrange a predatory 8 loan or assist others in doing so. 9 (2) A person who acting in good faith fails to comply 10 with this subsection will not be deemed to have violated this 11 subsection if the person establishes that: 12 (i) Within 30 days of the loan closing and prior to 13 the institution of any action under this act, the 14 borrower is notified of the compliance failure, 15 appropriate restitution is made and whatever necessary 16 adjustments are made to the loan to either, at the choice 17 of the borrower: 18 (A) make the predatory loan satisfy the 19 requirements of this act; or 20 (B) change the terms of the loan in a manner 21 beneficial to the borrower so that the loan will no 22 longer be considered a predatory loan subject to the 23 provisions of this act. 24 (ii) The compliance failure was not intentional and 25 resulted from a bona fide error notwithstanding the 26 maintenance of procedures reasonably adapted to avoid 27 such errors and within 60 days after discovery of the 28 compliance failure and prior to institution of any action 29 under this act or the receipt of written notice of 30 compliance failure, the borrower is notified of the 20010H1280B1497 - 10 - 1 compliance failure, appropriate restitution is made and 2 necessary adjustments are made to the loan to either, at 3 the choice of the borrower: 4 (A) make the predatory loan satisfy the 5 requirements of this act; 6 (B) change the terms of the loan in a manner 7 beneficial to the borrower so that the loan will no 8 longer be a predatory loan subject to the provisions 9 of this act. 10 Bona fide errors include clerical, calculation, computer 11 malfunction and programming, and printing errors; or an error 12 of legal judgment with respect to a person's obligations 13 under this act is not a bona fide error. 14 (b) Lending without home loan counseling.--No person shall 15 make, issue or arrange any subprime or high-cost loan or assist 16 others in doing so without first receiving notice from a 17 counselor approved by the department that the borrower has 18 received counseling on the advisability of the loan transaction 19 and the appropriateness of the loan for the borrower based upon 20 the information provided by borrower and lender to the counselor 21 at the time counseling is provided to the borrower. 22 (c) Lending without due regard to repayment.-- 23 (1) No lender shall make, issue or originate a subprime 24 or high-cost loan if the lender does not reasonably believe 25 at the time the loan is consummated that the borrower or 26 borrowers, when considered collectively in the case of 27 multiple borrowers, will be able to make the scheduled 28 payments to repay the obligation, based upon consideration of 29 the borrower's current and expected income, current 30 obligations, employment status and other financial resources, 20010H1280B1497 - 11 - 1 other than the borrower's equity in the dwelling which 2 secures repayment of the loan. 3 (2) A borrower shall be presumed to be able to make the 4 scheduled payments to repay the obligation if, at the time 5 the loan is consummated or at the time of the first rate 6 adjustment in the case of a lower introductory interest rate: 7 (i) the borrower's scheduled monthly payments on the 8 loan, including principal, interest, taxes, insurance and 9 assessments, combined with the scheduled payments for all 10 other debt, do not exceed 50% of the borrower's monthly 11 gross income as verified by the credit application, the 12 borrower's financial statement, a credit report, 13 financial information provided to the lender by or on 14 behalf of the borrower or any other reasonable means; and 15 (ii) the borrower has sufficient "residual income," 16 as defined in the guidelines established in 38 CFR 17 36.4337(e) and VA form 26-6393, to pay essential monthly 18 expenses after paying the scheduled payments and any 19 additional debt. 20 This subsection applies only to borrowers whose income, as 21 reported on the loan application which the lender relied upon in 22 making the credit decision, is no greater than 120% of the 23 median family income for the statistical area, as defined by the 24 Director of the United States Office of Management and Budget. 25 For purposes of this subsection, the median family income shall 26 be derived from the most recent estimates made available by the 27 United States Department of Housing and Urban Development at the 28 time the application is received. For purposes of determining 29 median income, only the income of the borrower or borrowers may 30 be considered. 20010H1280B1497 - 12 - 1 (d) Payments to home improvement contractors.-- 2 (1) A lender shall not pay proceeds of a subprime or 3 high-cost loan to a home improvement contractor, as defined 4 in the act of August 14, 1963 (P.L.1082, No.464), known as 5 the Home Improvement Finance Act. 6 (2) A home improvement contractor may not receive the 7 proceeds of a subprime or high-cost loan, except by an 8 instrument payable solely to the borrower or borrowers or at 9 the election of the borrower, through a third-party escrow 10 agent in accordance with terms established in a written 11 agreement signed by the borrower and the home improvement 12 contractor prior to the disbursement, except that in no event 13 may more than 25% of the total proceeds of the subprime or 14 high-cost loan be disbursed at the time of closing. 15 (e) Incorporating governmental financial assistance funds.-- 16 Funds from any program administered by the Commonwealth, a 17 Commonwealth agency or a Commonwealth-related agency may not be 18 promoted, utilized, packaged or in any way incorporated in 19 combination with any high-cost or predatory loan. 20 (f) Notice to customers of home improvement contractors.-- 21 Each home improvement contractor must furnish the following 22 notice as published from time to time by the department along 23 with each home improvement contract or bid for home improvement 24 contract for any work to be performed on a residence located 25 within this Commonwealth: 26 IMPORTANT NOTICE TO CUSTOMERS OF HOME IMPROVEMENT 27 CONTRACTORS 28 If you need a loan to pay for home improvements: 29 BE CAREFUL. A lender will probably want to take a mortgage 30 on your house. You should not borrow more than you can afford 20010H1280B1497 - 13 - 1 or more than you need. The loan you are being offered may be a 2 subprime or high-cost loan. You may be eligible for a different 3 loan which charges significantly less interest or fees. 4 Be very cautious about consolidating your debt with a home 5 mortgage. Beware that if you default on this loan you could 6 lose your home! 7 It is now the law in Pennsylvania that before you sign any 8 subprime or high-cost home loan you must receive housing 9 counseling assistance. 10 For the name, address and telephone number of a housing 11 counseling or legal services agency in your neighborhood, turn 12 this notice over to see the list of agencies printed on the 13 reverse side. 14 I received this notice on this date: ___________________(date). 15 ___________________________ signature of homeowner(s) 16 (g) Certification of compliance to be recorded.--All 17 mortgages recorded in any county must be accompanied by a 18 certification, signed by the lender, title insurance company 19 and, if applicable, the mortgage broker, agent or any other 20 person involved in arranging the loan, that the loan is not a 21 predatory loan. This certification must be submitted to the 22 county for recording along with the mortgage instrument and 23 deed. The certification of compliance shall be substantially in 24 the following form and shall comply with any formatting 25 requirements promulgated from time to time by the county. 26 CERTIFICATION 27 The undersigned lender, title insurance company, mortgage 28 broker and agent certify that, to the best of our knowledge, 29 information and belief, the attached mortgage, described below, 30 entered into between _________________________ (name of lender) 20010H1280B1497 - 14 - 1 and ________________________ (name of borrower) on ____________ 2 (date of execution) for the property located at _______________ 3 (street address of property) does not constitute a predatory 4 loan and further certify as follows: 5 Type of mortgage: First mortgage Junior mortgage (circle one) 6 The annual percentage rate of the loan is ____________________ 7 The applicable treasury rate is: _____________________________ 8 The total loan amount is _____________________________________ 9 The total amount of points and fees* is _______________________ 10 The percentage of points and fees* charged is: ________________ 11 * Points and fees are defined in section 3 of the act of 12 , known as the Predatory Lending Practices Law. 13 1. The mortgage is neither a subprime nor high-cost loan. 14 2. The mortgage is a subprime loan and the borrower has 15 received housing counseling. A certification of housing 16 counseling is attached to this certification. 17 3. The mortgage is a high-cost loan and the borrower has 18 received housing counseling. A certification of housing 19 counseling is attached to this certification. 20 4. The mortgage does not violate any provision of the act of 21 , known as the Predatory Lending Practices Law. 22 Date: _____________ 23 ____________________________ Mortgage lender 24 ____________________________ Address 25 ____________________________ Telephone number 26 ____________________________ Title insurance company 27 ____________________________ Address 28 ____________________________ Telephone number 29 ____________________________ Mortgage broker 30 ____________________________ Address 20010H1280B1497 - 15 - 1 ____________________________ Telephone number 2 ____________________________ Agent for the lender 3 ____________________________ Address 4 Section 5. Enforcement. 5 (a) Department of Banking.--The department is hereby charged 6 with the enforcement of this act. The department shall 7 promulgate such rules, regulations and procedures as may be 8 deemed necessary to aid in the administration and enforcement of 9 this act. For the purpose of enforcement of the provisions of 10 this act, the department shall maintain a listing of those 11 business entities which have been determined to meet the 12 definition of high-cost lender and predatory lender and shall 13 regularly distribute this listing to all Commonwealth agencies 14 and Commonwealth-related agencies. This listing shall also be 15 made available to the public free of charge by request. 16 (b) Predatory Lending Review Committee.-- 17 (1) The Predatory Lending Review Committee is hereby 18 created to serve as an advisory committee to the department 19 in the exercise of its duties under this act. 20 (2) The committee shall be composed of seven members, 21 appointed by the Governor, who shall serve without 22 compensation. To qualify for appointment on the committee a 23 person must have demonstrated expertise and/or experience 24 with housing or consumer matters. All appointments shall be 25 for a term of four years. The members of the committee shall 26 select a chairperson. Members appointed to fill vacancies 27 shall serve for the balance of the term for which their 28 predecessors were appointed. All persons appointed to serve 29 on the committee shall be representatives from the following 30 organization: 20010H1280B1497 - 16 - 1 (i) Two representatives of banks. 2 (ii) Two representatives of housing counseling 3 agencies certified by the department. 4 (iii) One representative of a community-based 5 organization which has demonstrated expertise and 6 experience in the area of predatory lending. 7 (iv) One representative of Community Legal Services, 8 Inc. 9 (v) One representative of a building and 10 construction trades organizations. 11 (3) The committee shall have the following powers and 12 duties: 13 (i) To investigate all subprime or high-cost loans 14 and all business entities submitted to the committee by 15 the department for compliance with the terms and 16 conditions of this act. 17 (ii) To recommend to the department the appropriate 18 penalties and fines to be assessed against any and all 19 culpable persons and business entities to effectuate the 20 purposes of this act. 21 Section 6. Private right of action. 22 (a) General rule.--Notwithstanding the provisions of section 23 5, any person aggrieved by a violation of this act or any 24 community-based organization shall have a right of action in a 25 court of competent jurisdiction and may recover for each 26 violation: 27 (1) Actual damages. 28 (2) Exemplary damages of $300 for each day of a 29 violation. 30 (3) Rescission or conversion of the predatory loan into 20010H1280B1497 - 17 - 1 a legitimate prime or subprime loan. 2 (4) Reasonable attorney fees and court costs. 3 (5) Such other relief, including injunctive relief, as 4 the court may deem appropriate. 5 (b) Other actions permitted.--Nothing in this act limits the 6 rights of an injured person to recover damages under any other 7 applicable law or legal theory. 8 Section 7. Antipredatory lending education, outreach and 9 counseling. 10 All funds recovered by the Commonwealth from the enforcement 11 of this act shall be dedicated to the funding of a comprehensive 12 program of Statewide antipredatory lending education, outreach 13 and counseling services. 14 Section 8. Commonwealth depositories, funds and investments. 15 (a) General rule.--Each Commonwealth depository shall: 16 (1) Provide the department with an affidavit certifying 17 that neither it, nor any of its affiliates, is and will not 18 become a high-cost lender or a predatory lender. The 19 affidavit shall be in a form prescribed by the department and 20 shall be sworn by one or more of the officers of the 21 depository. 22 (2) Provide the department with predatory lending 23 information, which shall include, but not be limited to, the 24 market share ratio of the depository's refinance loans in 25 minority census tracts in this Commonwealth to nonminority 26 census tracts; and the market share ratio of the depository's 27 refinance loans in low-income and moderate-income census 28 tracts in this Commonwealth to middle-income and upper-income 29 census tracts; and consider each affiliate separately in 30 calculations. 20010H1280B1497 - 18 - 1 (b) Commonwealth funds.--The Commonwealth shall not keep any 2 department funds on deposit in any bank or other financial 3 institution which engages in lending practices as a high-cost 4 lender or a predatory lender. 5 (c) Commonwealth investments.-- 6 (1) No Commonwealth moneys or funds held under any 7 provision of law shall remain invested or hereafter be 8 invested in the stocks, securities or other obligations of 9 any business entity which is a high-cost lender or a 10 predatory lender or which is an affiliate of a business 11 entity which is a high-cost lender or a predatory lender. 12 (2) The divestiture required by this subsection shall be 13 completed within six months of receipt by the investing 14 agency of notice from the department that a business entity 15 is a high-cost lender or a predatory lender or an affiliate 16 of a high-cost lender or a predatory lender. During the six- 17 month period, the investing agency shall make regular reports 18 to the department concerning the progress of divestiture. If, 19 prior to expiration of the six-month time limit for 20 divestiture, the investing agency determines that completion 21 of divestiture within the six-month time limit will 22 necessitate substantial losses to the Commonwealth, the 23 investing agency shall request from the department an 24 extension of time within which to complete divestiture. 25 Section 9. Penalties. 26 (a) Penalties.-- 27 (1) A person who violates this act commits a summary 28 offense and, upon conviction, shall be sentenced to pay a 29 fine of not less than $100 and not more than $300 and to 30 imprisonment for not more than 90 days. 20010H1280B1497 - 19 - 1 (2) Each day a borrower is assessed with interest on the 2 principal loan amount of a predatory loan shall constitute a 3 separate violation. 4 (b) Loss of public contracts.--No person shall be awarded a 5 contract with the Commonwealth if the person or any of its 6 affiliates is a high-cost lender or a predatory lender. Every 7 person seeking to do business with the Commonwealth shall submit 8 to the Commonwealth an affidavit certifying that neither it nor 9 any of its affiliates is a high-cost lender or a predatory 10 lender. The affidavit shall be in a form prescribed by the 11 department and shall be sworn by the person or one or more of 12 the officers or owners of the business entity, as the case may 13 be. Nothing in this section shall affect the validity of a 14 contract entered into in connection with any debt obligations 15 issued by or on behalf of the Commonwealth, regardless of 16 whether the contract was awarded in compliance with this 17 section. Any other contract awarded in violation of this section 18 shall be voidable at the option of the Commonwealth. The 19 department may suspend the ineligibility of a person in order to 20 allow execution of a contract with the person upon written 21 application by the head of the Commonwealth agency or 22 Commonwealth-related agency affected by the proposed contract, 23 setting forth facts sufficient in the judgment of the purchasing 24 agent to establish: 25 (1) that the public health, safety or welfare of the 26 Commonwealth requires the goods or services of the person or 27 business entity; and 28 (2) that the Commonwealth is unable to acquire the goods 29 or services at comparable price and quality and in sufficient 30 quantity from other sources. 20010H1280B1497 - 20 - 1 (c) Forfeiture of government-funded housing assistance.--A 2 person that receives any grant funds from the Commonwealth to 3 assist a borrower in securing a high-cost loan or predatory loan 4 shall forfeit all such funds to the Commonwealth, provided that 5 nothing in this section shall restrict the ability of any agency 6 receiving grant funds from the Commonwealth from providing 7 counseling services to borrowers of subprime and high-cost 8 loans. 9 Section 10. Severability. 10 The provisions of this act are severable. If any provision of 11 this act or its application to any person or circumstance is 12 held invalid, the invalidity shall not affect other provisions 13 or applications of this act which can be given effect without 14 the invalid provision or application. 15 Section 11. Effective date. 16 This act shall take effect in six months. A24L07MRD/20010H1280B1497 - 21 - Predatory Lending Brief --------1/26/00 Predatory Lending: Is the practice of charging exorbitant interest rates and attaching hidden fees to loans and mortgages. These loans are geared toward those of low income and or people with bad credit records. They go beyond the bounds of a normal sub-prime loan and are specifically designed to make an unfair profit off of the people they purport to help. Payday Lenders: High Interest Mortgage Lenders: Prime versus sub-prime rates: Legislative Initiatives: In Pennsylvania predatory lenders have been given safe harbor for several years and now we are reaping the ugly harvest. Philadelphia City Council has introduced legislation to combat the practice, but the jury is still out on how successful that will be. |
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