Writer Waving signs and chanting slogans, consumer advocates urged City Council yesterday to pass a bill designed to limit high-cost predatory loans. But lenders and mortgage brokers said the proposed measure would hurt low-income borrowers who need money the most. The bill, introduced by Councilwoman Marian Tasco, calls for increased disclosure by predatory lenders and prevents those lenders from doing business with the city or participating in any home ownership or home repair programs. Predatory loans tend to have higher interest rates and fees than conventional bank loans. The loans are often made to borrowers with poor or no credit.
Lenders say the higher interest rate and fees are needed because the borrowers present more risk.
Consumer advocates counter that the higher interest rate and fees exceed the risk, and, in fact, the exorbitant costs lead to greater defaults. More than 10 residents detailed a litany of horror stories surrounding high-cost loans that left them deep in debt. The loan came with a 13 percent interest rate and refinanced two existing loans that had lower interest rates. Preliminary studies by The Reinvestment Fund shows that predatory lending is more widespread among homeowners in low-income neighborhoods, populated mainly by older minorities who lack a high school diploma. The parts of the city hit the hardest include sections of north, south and west Philadelphia, said Ira Goldstein, who is leading a team of researchers at The Reinvestment Fund, a private firm that makes loans in inner cities.