FTC ENFORCEMENT FOCUSES ON PREDATORY LENDING
by Deborah Freye and Judith Scheiderer*
The Federal Trade Commission (FTC), in a letter to the Board of Governors of the Federal Reserve System dated February 7, 2002, summarized its 2001 enforcement activities and methods under the Truth in Lending Act (TILA), the Consumer Leasing Act, the Equal Credit Opportunity Act (ECOA) and the Electronic Fund Transfer Act. During 2001, the major focus of the FTC’s activities was predatory lending. The FTC:
Filed an action and continued two litigations against subprime mortgage lenders for alleged violations of TILA/Regulation Z, the FTC Act and ECOA, including (i) failing to fully disclose the cost of credit, (ii) misrepresenting amounts borrowed, costs and savings, (iii) inducing consumers through deceptive practices to enter high cost transactions, and (iv) failing to collect and maintain information and provide notices in connection with applications;
Testified before the California State Assembly Committee on Banking and Finance on predatory lending practices in the subprime mortgage market, including those involving TILA and the Home Ownership and Equity Protection Act (HOEPA);
Promoted initiatives to combat predatory lending, including increasing enforcement activities, coordinating efforts with other agencies, increasing consumer education and hosting a forum;
Filed two comments supporting the Federal Reserve Board’s proposed amendments to Regulations Z and C, which were later approved, to (i) broaden the scope of HOEPA by adjusting the HOEPA price triggers downward, prohibiting certain acts and practices in connection with HOEPA and strengthening the disclosures required for HOEPA loans (compliance becomes mandatory on October 1, 2002), and (ii) expand coverage of the Home Mortgage Disclosure Act (HMDA) to include more non‑depository lenders, require disclosure of pricing data on higher cost loans and simplify some aspects of HMDA reporting requirements (effective for data collection on January 1, 2003);
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*Deborah Freye and Judith Scheiderer are attorneys with Dreher Tomkies LLP. Ms. Scheiderer is Managing Editor of the Firm’s Credit Card Digest. Their direct dial numbers are 614-628-1611 and 614-628-1607, respectively.