Attorney General's News Release

(For more information from the office of Illinois Attorney General Lisa Madigan, please contact Melissa Merz at 312-814-3118; for more information from the office of Missouri Attorney General Jay Nixon, please contact Beth Hammock or Scott Holste at 573-751-8844.)

June 30, 2004

Attorneys General Nixon, Madigan join forces to combat predatory lending, announce grant to benefit bi-state area

Attorney General Nixon announces a $54,000 grant to educate Missouri and Illinois consumers in the St. Louis area about predatory lending. Joining Nixon are, from left, Chris Krehmeyer, executive director of Beyond Housing/Neighborhood Housing Services; Diane Thompson of the Land of Lincoln Legal Assistance Foundation; and Illinois Attorney General Lisa Madigan. Nixon and Madigan helped the two agencies obtain the grant.

St. Louis, Mo. — Metro-area consumers will see a full force attack on predatory lending, thanks to a grant received by area agencies with assistance from Missouri Attorney General Jay Nixon and Illinois Attorney General Lisa Madigan. Predatory lending involves extending high-rate, high-fee loans to people who have limited borrowing options due to their poor credit ratings.

Metro-area consumers will see a full force attack on predatory lending, thanks to a grant received by area agencies with assistance from Missouri Attorney General Jay Nixon and Illinois Attorney General Lisa Madigan. Predatory lending involves extending high-rate, high-fee loans to people who have limited borrowing options due to their poor credit ratings.

The attorneys general held a joint news conference today to announce the awarding of a $54,080 grant to Beyond Housing/Neighborhood Housing Services (NHS) of St. Louis Inc. and Land of Lincoln Legal Assistance Foundation Inc. (LOL) to fight predatory lending and arm consumers with information. The news conference took place at the office of Beyond Housing/NHS in St. Louis.

The two non-profit organizations received the grant from the Consumer Protection and Education Fund, a fund established by the settlement of a 50-state enforcement action against Sears, Roebuck and Co. Beyond Housing/NHS and LOL submitted the grant application on behalf of the St. Louis Coalition to Promote Reputable Lending, an umbrella organization established three years ago to provide personal financial education to St. Louis-area consumers.

The grant will expand the existing “Don't Borrow Trouble” anti-predatory lending initiative used by the Coalition. Consumers in the predatory lenders' target market segment will receive information via television commercials, brochures, posters and workshops. The consumers will hear warnings about unscrupulous lenders and learn about educational programs and services designed to help them escape bad debt.

”We must fire back at the predatory lenders who lure vulnerable people to make uninformed and unwise borrowing decisions,” Attorney General Nixon said. “This proactive approach will help many people enjoy home ownership without the heartache that comes from high-interest loans.”

”Predatory lending practices can wipe out a family's life savings and eat away at the foundations of a community,” Attorney General Madigan said. “Too often, consumers who dream of owning homes and homeowners trying to refinance are bombarded by ads with false or misleading promises. This education campaign is designed to tell them what the predatory lenders don't want them to know: that these loans are high-cost and high-risk gambles that can leave you in very deep debt or cause you to lose your home.”

The mortgage fund corporation Freddie Mac developed the “Don't Borrow Trouble” public information service program and provided $25,000 in seed money to the Coalition. A toll-free number for “Don't Borrow Trouble,” 866-299-2899, is already in operation. With the added resources from the Sears fund grant, the Coalition expects 5,000 people to contact member agencies and 1,500 people to receive individual financial education.

Consumers will receive many specialized services including:

• Credit and budget counseling that will allow homeowners to work toward refinancing their homes with lower rate loans.
• Legal services for loss mitigation, litigation and consumer loan workouts.
• Referrals to reputable lenders.
• A loan rescue fund to help home buyers receive either interim financing or permanent financing to refinance predatory loans.

Both the Missouri and Illinois Attorney General's Offices participate in the St. Louis Coalition to Promote Reputable Lending, along with approximately 50 legal services advocates, housing counselors, social service providers, representatives of consumer credit counseling agencies, civil rights organizations, lenders, representatives of the secondary market and state and local government officials. Attorneys General Nixon and Madigan wrote letters of support as part of the grant application.

The grant application states that a disproportionate number of predatory lending victims nationwide are minority and elderly. When compared to 34 other metropolitan areas of similar size and attributes, the St. Louis area ranks worst in the terms of the ratio of African-Americans to whites who spend more than 35 percent of their income on housing.

Recent studies also show the St. Louis area has a high incidence of race-based sub-prime lending. Sub-prime lenders spend large sums of money on marketing campaigns that target minorities and seniors. Mainstream lenders do not focus their advertising on loans to low-to-moderate income, so there is no “counter-message” to the advertising of sub-prime lenders. “Don't Borrow Trouble” provides that counter-message, the attorneys general say.

Inquiries from consumers should be directed to consumer@ago.mo.gov or 1-800-392-8222 (from within Missouri) or 573-751-3321 (outside Missouri).

All media inquiries should be directed to Press Secretary John Fougere.

E-mail      Phone: 573-751-8844         Fax: 573-751-5818