Predatory Lending practice consists of any loans that are described as unfair, deceptive, or fraudulent practices by lenders during the loan origination process. These loans are categorized by the following characteristics: unjustified risk based pricing, single premium credit insurance, failure to present the loan price as negotiable, failure to clearly and accurately disclose terms and conditions, loans which do not accurately reflect the credit score of the consumer, short- term loans with disproportionally high fees, servicing agent and securitization abuses, and loans based on discriminating factors.
• Proposals that request companies to adopt policies that preclude predatory lending.
• Proposals that ask companies to prepare reports explaining racial and ethnic disparities pertaining to high cost mortgages and other forms of lending.
• Proposals that request reports on company lending guidelines and procedures, including the establishment of a board committee for oversight, taking into account:
− Whether the company has adequately disclosed mechanisms in place to prevent abusive lending practices.
− Whether the company has adequately disclosed the financial risks of the lending products in question.
− Whether the company has been subject to violations of lending laws or serious lending controversies.
− Peer companies' policies to prevent abusive lending practices.
• Proposals that implement stricter accounting policies based on international accounting standards.
• Proposals that promote greater disclosure of leverage and discouraging excess leverage that we believe can result in unnecessary risk taking.
The Equator Principles
• Proposals that support the adoption of the Equator Principles (http://www.equator-principles.comwww.equator-principles.com) unless the institution has limited loan transactions that fit within these Principles. In adopting the Equator Principles, a financial institution agrees to provide project finance loans only to those projects that borrowers agree to develop in a socially responsible manner and according to sound environmental management practices. The Equator Principles are applied globally and to all industry sectors.
We note that the Equator Principles have been expanded to include: 1) Project Finance Advisory Services 2) Project Finance 3) Project-Related Corporate Loans and 4) Bridge Loans.