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Lending Practices Under Fire: A Regulatory Update

Lending Practices Under Fire: A Regulatory Update

A new report from Aite Group provides a regulatory update on two lending practices currently under fire: payday lending and subprime mortgage lending.
By Eva Weber

Boston, MA, April 25, 2007 – New research from Aite Group, LLC, provides a snapshot of the current federal and state regulatory environment, and discusses the debate among regulators, financial institutions, and lenders about how to provide consumers with a broad range of financial products while protecting them from the problems that those products can sometimes present


Source: Aite Group

The report also discusses state and federal regulatory activity with regard to payday lending and anti-predatory lending laws. Regulatory solutions toward the "Legislate" end of the spectrum would heavily impact consumer flexibility and business practices, while solutions on the "Self-Police" end of the spectrum would tend to provide the least consumer protections but would also have the lowest impact on the industry's viability. In reality, any regulatory solution will probably involve elements across the spectrum.

According to Eva Weber, an analyst at Aite Group and author of the report, "Consumer ire over dubious sales practices is translating into regulatory and political attention. Lenders seeking to profit in the subprime market should expect numerous obstacles in the coming months. In many states, payday lenders will have to deal with offering free repayment plans, entering loan information into databases, limiting rollovers of loans, and providing cooling-off periods for cyclical payday loan users. On the subprime mortgage front, some federal legislators are pushing hard to attach liability to predatory subprime mortgage loans. At a minimum, we will likely see additional guidance on proper disclosures of loan terms and the underwriting of subprime loans."

This 16-page Impact Note contains 7 figures and tables. Clients of Aite Group's Retail Banking services can download the report.