Predatory lending bill
dies in conference committee

Opponents and advocates
could not find common ground

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By Star-Bulletin staff

A controversial bill to stop so-called predatory lending practices in Hawaii is dead this year at the Legislature because advocates and opponents could not reach middle ground.

The issue is an important one, and the Legislature will likely revisit it next year, said Rep. Kenneth Hiraki (D, Kakaako). Hiraki and other leaders of a House-Senate conference committee decided last week to defer the "Hawaii Home Loan Protection Act" indefinitely, killing it.

Predatory lending refers to the practice of selling loans that carry heavy fees to unsuspecting homeowners who typically have poor credit and could never pay the money back. The borrower ends up losing their home.

Several states, including North Carolina, have enacted laws to ban the loans. Some Hawaii banks and mortgage brokers contend that tougher laws would stifle lending in general, hurting consumers.

A bill that originated this year in the House would have rewritten Hawaii home lending laws. For example, the measure would have banned late fees that are higher than 5 percent of the amount that is due, and would have eliminated nonjudicial foreclosures, which occur out of court.

The Senate approved a different version of the bill, one that was crafted by the banks and would have simply brought Hawaii laws in line with existing federal laws that cover "high-cost loans." Critics of the move, such as Big Island attorney George Zweibel, say that federal laws only cover 5 percent of all loans. Zweibel represents people who have lost their homes to predatory lending.

A month ago, Legislators had asked Zweibel and the banks to discuss the issue to try to reach a compromise, but the talks quickly broke down with little consensus, Hiraki said.

"Both sides were unwilling to budge or unwilling to compromise," Hiraki said.

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