Philadelphia Predatory Lending Task Force
“Helping to keep residents informed and protected”
PA Legislature Predatory Lending Bill
HOUSE BILL 1280 P_N_ 1497
THE GENERAL ASSEMBLY OF PENNSYLVANIA
No. 1280 Session of 2001
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
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.
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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
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
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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,
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
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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
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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,
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;
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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
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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.
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1 (8) Modification or deferral fees. A loan which includes
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
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
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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
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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,
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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.
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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
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
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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.
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)
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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
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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
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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,
9 (v) One representative of a building and
10 construction trades organizations.
11 (3) The committee shall have the following powers and
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
27 (1) Actual damages.
28 (2) Exemplary damages of $300 for each day of a
30 (3) Rescission or conversion of the predatory loan into
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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
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
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
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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.
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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.
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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
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 -
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.
High Interest Mortgage Lenders:
Prime versus sub-prime rates:
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.