NYCUA's Lanotte testifies on predatory lending before Senate Banks Committee
April 24, 2015
ALBANY, N.Y. (4/27/15)--New York credit unions provide a more consumer-friendly lending alternative to the practices of predatory lenders, a New York Credit Union Association (NYCUA) representative said in testimony last week before a state Senate Banks Committee hearing on predatory lending practices within the sub-prime auto and title loan industry.
The hearing was to gather data from regulatory and administrative agencies as well as auto lenders and dealers on subprime auto lending to determine if legislation was needed to address some troubling trends that have been reported relating to subprime auto lending.
Speaking on behalf of the NYCUA was Mike Lanotte, senior vice president/general counsel.
Lanotte's testimony offered credit union lending practices as a model that exemplifies a balance between sound business practices and consumer protection. He encouraged the Senate to look to credit union practices when drafting any legislation.
Lanotte drew parallels between the lending practices from the mortgage crisis that led to the Great Recession and the recent trends in auto lending. "In 2008, the country entered its most severe economic downturn since the Great Depression," Lanotte said. "This downturn was the direct result of reckless underwriting standards and inadequate regulation of a segment of mortgage lenders. Credit unions can proudly state today that they did not contribute to this crisis."
The auto lending industry is experiencing many of the same negative trends that the housing industry experienced in the lead up to the financial crisis, Lanotte said. "Again, credit unions are not the cause of these trends but could be negatively impacted by any regulation designed to curb them," he said.
Lanotte expressed concerns with an "erosion of underwriting standards" at large banks and the rise in indirect lending, as well as the securitization of auto loans, which only the largest banks can profit from.