Released: December 01, 2006

Court nullifies Maryland county anti-predatory loan law

Source: Michael S. Rosenwald, Washington Post (Free Registration)

A state judge has struck down a Montgomery County law that authorized stiffer penalties against predatory lending practices, saying the measure was beyond the county’s authority under the Maryland constitution.

The law, sponsored by County Council member Tom Perez (D-Silver Spring), would have allowed fines of up to $500,000 against mortgage lenders if it could be proved that they discriminated against minority borrowers by giving them more expensive loans with onerous repayment terms. The maximum fine had been $5,000.

Lenders opposed the measure, saying it was too vague and exposed them to financial risk. Dozens of lenders said the law would force them to stop doing business in the county, raising the possibility of less competition and higher interest rates.

The American Financial Services Association, a trade group representing mortgage lenders, sued the county in February, arguing that states, not local governments, have the authority to regulate mortgage lending.

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