Cracking Down on Predatory Lending
April Baer: One of the most common complaints among predatory lending victims is the lack of access to information that might have helped - information the state seems unwilling to provide. Among the thousands who've come to the Department of Commerce with predatory lending complaints are Lyndhurst residents Tom and Lori Parks, who are one legal injunction away from losing their home today (Monday, March 11th).
The Parks' occupy this house with two small, very active daughters. The place is chaotic, but cheerful. In 1999 Tom and Lori fell behind on their bills. Their primary creditor, Household Finance, told them if they didn't refinance their mortgage, legal action would be taken. As they signed the papers, Tom noticed something strange about the payment schedule. It appeared that only three of their four loans would be paid off. When he asked about it, he was assured the paperwork would take time to process, but would soon be straightened out, and he shouldn't worry.
Tom Parks: Turned out that loan was NOT paid off, and they ended up freezing our checking account by getting a judgment on the loan within two weeks of the time.
AB: The debts have never been completely settled; the Parks' took their dispute to court in December. But before they did so, Tom called the only state agency with jurisdiction over lenders, the Ohio Department of Commerce, to ask for help. Within hours of calling the state, Tom says he received a phone call from Household, warning him to back off.
TP: They had told me 'You're not going to get anything done in Ohio. We tell them what to do in Ohio.' And they said Governor Taft worked for them.
AB: A spokeswoman for Household's parent company was unable to provide facts about the case, since the matter's gone to litigation.
Many housing activists believe it's at times like this that tougher state legislation is needed. First of all, Ohio has no legal definition for predatory lending in Ohio, no laws that clearly define what is exploitative and what is not. Second, consumers have little access to information on how reliable their prospective lender might be. Bill Teets, spokesman for the Ohio Department of Commerce, says disclosure rules prevent him from revealing many details. He can't confirm whether Tom Parks ever called to complain about Household. He can't say how many complaints have been made about Household in the past, or the nature of those complaints. He can't disclose if it was the state that notified Household about the situation, although he says that might have been a standard procedure. Bill Teets says no one at the state denies that predatory lending is a problem, but the Department simply hasn't been given the power to act on behalf of the consumer.
Bill Teets: Most of what our laws in the past have been have been related to the licensing of these various professions or institutions. Anything we were able to do is really more related to taking action against the license. We have very little ability to work with a consumer to ensure restitution or anything like that.
AB: As far as the conversation Tom Parks recounted on the state's relationship to lenders, Household again refused to comment specifically. But spokeswoman Kathleen Morrison did say emphatically this kind of sentiment is not endorsed by the company.
Kathleen Morrison: You know, we are regulated by the DOC and this division's responsible for regulating a wide variety of state chartered and financial institutions. It just doesn't make sense.
AB: What would be the policy toward an employee that WOULD make comments like that?
KM: I imagine that the employee would be reprimanded up to and including termination.
AB: Morrison is unable to give specific information about what Household staff have said to Tom Parks.
According to state campaign finance filings, the Ohio Association of Mortgage Bankers' Political Action Committee recently made a fifteen-hundred-dollar contribution to Ohio House Speaker Larry Householder. Another thousand dollars went to the sponsor of House Bill 386, the new predatory lending bill - which critics claim is favorable to lenders. But the Department of Commerce's Bill Teets categorically denies that the state's regulation has been compromised by industry influence.
BT: We will take every complaint that is given to the Department of Commerce, and base it on the merits of the complaint itself. We do not take any consideration into who gives money to whom qyuite frankly the people who handle our complaints have no idea who gives money to what political party or candidate. Our job is spelled out according to the law, and we work very hard to ensure that we follow that law to a tee, and either address complaints… or try to get consumers in contact with someone who can see their complaint is resolved.
AB: Joe Andrews, a spokesman for governor Taft issued a similar denial that political donations are holding back regulation in the lending industry.
Joe Andrews: Governor Taft obviously works for all the people of the state of Ohio and represents them, and that's our job. But the Department of Commerce also regulates lenders and treats all lenders with the same rules, and obviously does regulate them.
AB: The effectiveness of that regulation is a subject of much debate. According to the Department of Commerce, most of complaints never even get as far as a hearing. While state officials interpret that as sign of successful negotiation, others call it proof that predatory lenders are out of control.
Since Ohio has no legal definition of predatory lending, the Parks' attorney is suing Household bank under the federal RICO anti-racketeering statute. Creditors had planned to foreclose on their home today, but their attorney was able to put a temporary stop to the sale. In Cleveland, I'm April Baer, 90.3 WCPN News.