Denver seeks to thwart predatory lending
Last week, Denver issued an RFP for banking services, and, at the same time, took steps to address predatory lending within the community. “The RFP provides that any banking contractor found to be in noncompliance with the specified predatory lending terms and certification will face the ‘sudden death’ consequence of immediate contract termination,” says Denver Auditor Don Mares.
According to the RFP, predatory lending practices include:
- targeting sub-prime loans to borrowers who could qualify for traditional, lower-interest loans;
- making loans with abusive or misleading conditions;
- bait-and-switch marketing;
- insurance premium packing; and
- loan flipping.
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The bank(s) selected through the RFP will provide services for the bulk of the city’s financial deposits and payments. Each institution must take steps to ensure that it does not engage in predatory lending practices, that it is not supporting such practices in other institutions and that it is willing to educate residents about ways to protect themselves from predatory lenders. It also must ensure that its affiliates (any institution in which the bank holds a majority interest) follow the same guidelines.
Any institution that is hired by Denver through the RFP process must certify that it is adhering to the terms set forth in the city’s contract. Certification will be provided annually and reviewed by the city’s auditor.