Banks Want Legal Immunity For Unaffordable Loans


We support reforms to the financial marketplace that protect consumers from unscrupulous banks and lenders.

By Consumers Union on Friday, November 9th, 2012

By Pam Banks

Bank lobbyists plan to make the most of the lame-duck session of Congress that gets underway next week. Almost before anyone has a chance to notice, they hope to pass an amendment undermining a crucial piece of the Dodd-Frank Wall Street reform law — the provision that was supposed to keep lenders from pushing unaffordable home loans.

The banks are looking for total immunity for making bad loans to consumers. Unaffordable loans were at the heart of the financial crisis and the foreclosure disaster. That’s why the Dodd-Frank Act requires banks to verify that borrowers have the “ability to repay.” The new Consumer Financial Protection Bureau is working now on putting this requirement – known as the qualified mortgage, or QM rule – in place.

But the Big Banks have a different idea. They are recruiting Senators to offer an amendment that shields lenders from legal consequences for pushing bad loans. This “no liability for banks” amendment would be attached to a non-controversial housing bill, the “Responsible Homeowner Refinancing Act” (S. 3522), which would make it easier for consumers to refinance at current low-interest rates.

The amendment, if it passed, would grant a so-called “safe harbor,” or legal immunity to banks for predatory loans they know that consumers won’t be able to pay back.  It would strip a homeowner of his or her right to pursue justice against a wrongful foreclosure.

The CFPB has worked diligently to hear the concerns of consumers, the banking industry and other parties in developing its rule.  It should be allowed to do its job based on good policy rather than the self interests of the banking industry.

This amendment undermines responsible lending and home ownership. Consumers Union is working hard to make sure consumers are protected and this amendment never sees the light of day.

Contact your Senators now.  Make sure they know you’ve heard about this reckless amendment that would harm consumers and jeopardize our economic recovery.  Tell them that you expect them to stand firm against it.

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