The House Financial Services Committee is drafting legislation to address predatory lending to be introduced later this session.

In a March 29 letter to lawmakers, committee chairman Barney Frank said many lenders are exempt from federal regulations, and not all states have laws on the books to prohibit abusive lending practices. The Massachusetts Democrat said some states that have passed legislation intended to protect consumers have seen their efforts preempted by federal regulators.

Frank said Congress should implement national standards that ensure that the interests of lenders and consumers are aligned. Mortgage originators should be rewarded for providing borrowers with loans on “the best terms they qualify for,” and be required to provide “clear and understandable” disclosures of loan terms.

The legislation will take “a measured approach,” cracking down on abusive lending while preserving access to credit, Frank promised.

“We cannot return to redlining,” Frank’s letter said. “We will remember that before predatory lending provided too much bad credit, many communities had little access to credit at all.”

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