Civil Rights Coalition Blasts OTS Preemption of Montgomery County Lending Discrimination Laws
Washington – Wade Henderson, executive director of the Leadership Conference on Civil Rights (LCCR), the nation’s oldest, largest and most diverse civil and human rights coalition, made the following statement in response to the Office of Thrift Supervision’s decision to preempt certain provisions of Montgomery County, Maryland’s law addressing abusive lending practices:
“It’s hard to believe that the Office of Thrift Supervision, which purports to protect consumers, would intentionally undercut Maryland laws that protect people from discriminatory lending practices. Yet they are doing just that. Councilman Perez’s bill to strengthen Montgomery County’s predatory lending law should be commended. We need more local officials willing to use their office to advance and protect the civil rights of the people they represent.”
Henderson also sent a letter to OTS Director John M. Reich outlining the coalition’s concerns and calling for reconsideration of the agency’s opinion. The full text of the letter, sent today, is below.
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Dear Director Reich:
This is to express my concern about the Office of Thrift Supervision’s (OTS) decision to preempt certain provisions of Montgomery County, Maryland’s fair housing law. This decision is unprecedented, unwarranted, and based on a misreading of the law. If this action stands, not only will it undermine efforts to prevent discriminatory lending practices, but it also will undermine decades of cooperation between local and federal officials in preventing discrimination.
For more than forty years, this country has benefited from federal, state, and local regulations that prohibit discrimination, in particular in areas of housing and lending. Never before have federal regulators sought to prevent local governments from passing anti-discrimination laws. In fact, the federal Fair Housing Act encourages state and local governments to enact fair housing laws that provide at least as much protection as federal law. (See 42 U.S.C. § 3615-3616.) More than 60 county and city housing ordinances now exist that include provisions prohibiting lending discrimination, and these laws are in many respects broader than the Montgomery County provisions preempted by the OTS. Lenders have complied with these ordinances without complaint.
The Montgomery County law is also consistent with the principles of the Fair Housing Act and the Equal Credit Opportunity Act. It simply states that a lender may not offer customers loans with the terms mentioned in the statute because of race, national origin, or other protected status. Thrift institutions are clearly already prohibited from offering loans with specific terms on the basis of race under federal law, and nothing in the Montgomery County ordinance is in conflict with that principle.
In fact, your opinion letter apparently misstates the content of the statute. You write that “provisions of the Code in question appear to prohibit making available a mortgage loan that: (1) includes the financing of single premium credit life insurance; (2) provides for excessive upfront points, excessive fees, or excessive prepayment penalties; or (3) provides compensation paid directly or indirectly to a person from any source.” This is inaccurate. Code § 27-12(c) actually states:
- “Without limiting the general application of Subsection (b), a person must not, because of race, color, religious creed, ancestry, national origin, sex, marital status, disability, presence of children, family responsibilities, source of income, sexual orientation, or age:
(2) Make available a mortgage loan which:
- (A) includes the financing of single premium credit life insurance;
(B) provides for excessive upfront points, excessive fees, or excessive prepayment penalties; or
(C) provides compensation paid directly or indirectly to a person from any source.”
Finally, I am gravely concerned that the OTS is presenting itself as the sole enforcer of discrimination laws for thrift institutions and their affiliates. The OTS has never taken an active role in preventing discrimination by its regulated entities. According to the Attorney General’s report to Congress, between 1999 and 2004 the OTS made only two fair lending referrals to the Department of Justice. (See U.S. Department of Justice annual Reports to Congress Pursuant to the Equal Credit Opportunity Act, available at www.usdoj.gov/crt/housing/housing_special.htm.) Actions taken directly by the OTS under the Equal Credit Opportunity Act have also been limited, and have dwindled in recent years–with no action taken in 2004 and only one action in 2003.[1] (See Federal Reserve Board Annual Reports from 1999 to 2004, available at www.federalreserve.gov/boarddocs/rptcongress.)
Local enforcement agencies play a vital role in investigating complaints of discriminatory actions and are ideally positioned to respond quickly. The federal government must continue to encourage and support local efforts that are consistent with federal prohibitions against discrimination. Why would we fail to use every level of public enforcement that is at our disposal? To do so undermines the law and sends a message that our federal government lacks a meaningful commitment to ending unlawful discrimination.
I hope you will reconsider your preemption decision and look forward to discussing this matter with you further.
Sincerely,
Wade Henderson
Executive Director
Leadership Conference on Civil Rights
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For more information on LCCR and the work we do please visit civilrights.org
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[1] The Federal Reserve Board Annual Report includes “a summary of the enforcement actions taken by each of the agencies assigned administrative enforcement responsibilities” under the Equal Credit Opportunity Act. Since 1995, the Federal Reserve reports that the OTS has taken the following number of actions under the ECOA: 1995- 8; 1996-4; 1997-3; 1998-2; 1999-3; 2000-4; 2001- 0; 2002-2; 2003-1; 2004-0.