Senate OKs ban on costly-loan bonuses
WASHINGTON — Taking aim at deceptive lending, the Senate yesterday voted to ban mortgage brokers and loan officers from getting bigger paychecks when they steer consumers to loans with higher interest rates and to require that borrowers prove they can repay their loans.
The Senate, however, rejected a measure that would have required home buyers to make a minimum down payment of 5 percent.
The votes were part of deliberations on a broad overhaul of financial regulations designed to avoid a repeat of the 2008 Wall Street crisis.
President Obama weighed in yesterday, criticizing efforts to exclude auto dealerships that offer car loans from the oversight of a proposed consumer financial protection bureau.
Auto dealers have been aggressively lobbying for an exemption, and the amendment, offered by Senator Sam Brownback, Republican of Kansas, could win bipartisan backing.
“This amendment would carve out a special exemption for these lenders that would allow them to inflate rates, insert hidden fees into the fine print of paperwork, and include expensive add-ons that catch purchasers by surprise,’’ Obama said.
The administration has answered by arguing that soldiers have been targeted by deceptive dealers.
In response, senators on a 98-to-1 vote approved an amendment from Senator Scott Brown, Republican of Massachusetts and Jack Reed, Democrat of Rhode Island, that would create a liaison to help prevent military families from falling prey to predatory lenders.
The Senate did not decide on Brownback’s amendment.
Unanimously approved was an amendment that made clear merchants and retailers not engaging in a financial services activity would not be policed by the proposed consumer protection bureau. Critics argued the bill could affect small-business owners, such as orthodontists, who allow patients to pay over time.
Separately, the Senate overwhelmingly voted to let the Federal Reserve retain its supervision of smaller banks. The underlying regulation bill would have given the central bank oversight over only the largest financial institutions.
Regional Fed presidents have lobbied senators to allow them to continue watching over smaller bank holding companies and state-chartered community banks.