The Hawaii Bankers Association, which initiated a statewide educational campaign last year after a bill prohibiting predatory lending stalled in conference committee, advised lawmakers yesterday to determine the scope of the problem before proposing legislation. Legislature hears
bankers’ testimony
on predatory lending
By Dave Segal
dsegal@starbulletin.comRodney Shinkawa, executive vice president of the bankers association, said the issue of predatory lending came up last legislative session with the introduction of the Hawaii Home Loan Protection Act.
The act died when separate versions of the bill passed the House and Senate, and a compromise could not be reached.
"We don't think predatory lending is too prevalent statewide," said Shinkawa. "That's one of the keys when legislation is drawn. Generally, you're there to correct a situation or prevent something from happening. I think it's up to the Legislature to determine how prevalent it is before it takes any action."
Shinkawa spoke to a joint meeting of the Senate Committee on Commerce, Consumer Protection and Housing, and the House Committee on Consumer Protection and Commerce.
Predatory lending involves lenders targeting people who are in immediate need of cash by offering loans at unusually high interest rates or fees. Sometimes the unsuspecting borrower is faced with making an unaffordable balloon payment at the end of the loan or, even worse, ends up losing his home. Predatory lending differs from subprime lending, in which the lenders offset the risk of offering a loan to a borrower with previous credit problems by charging higher fees and or interest rates.
Nationally, there are between 16 and 19 states, including Washington, D.C., that have laws addressing predatory lending, First Hawaiian Bank's Neal Okabayashi told the panel members. He said on the federal level a proposal that will be submitted to Congress that is tougher than the Home Ownership and Equity Protection Act currently on the books.
Shinkawa, meanwhile, said the bankers association last year conducted 10 seminars statewide and distributed an educational video to 33 community groups for their personal presentations. Although the seminars were poorly attended, he said it's important to get the message out. The types of borrowers who are victimized the most, he said, are the elderly, people with low incomes or damaged credit ratings and the less sophisticated.
"The most common abuse involves the refinancing of the loan where the borrower may have a high equity value on his house but not a very large income to pay off the loan after it's made," Shinkawa said. "If the borrower falls behind or accumulates other bills, generally he ends up refinancing over a period of years and the loan becomes bigger and bigger and he's dug himself into an even deeper hole because he can't repay the debt."
