Three years after passing a law intended to curb predatory mortgage lending, the Kentucky General Assembly effectively undid that law yesterday. But legislators disagreed — as do bankers and consumer advocates — on whether the latest action will harm borrowers. The House of Representatives voted 79-16 to enact Senate Bill 45, which Kentucky banks said would make them more competitive with national banks. It exempts state-chartered banks from most Kentucky laws or regulations that don’t apply to national banks.
Those laws include the High Cost Loan Act that legislators enacted in 2003 to protect consumers against predatory loans. It included some disclosure requirements and put limits on some fees. Consumer groups say financing credit life insurance over the life of a 20- or 30-year loan is an abusive practice. They say many borrowers don’t realize how much it will cost them. Two large consumer-finance companies, Household International and Citigroup, have agreed to halt the practice, Owens noted. “We should not make it (possible for) banks in this state to continue to rip off poor folks” by financing the insurance premium, he said.
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