NEWS FROM THE CITY ATTORNEY'S OFFICE
FOR IMMEDIATE RELEASE

November 16, 2001

COURT UPHOLDS OAKLAND'S PREDATORY LENDING LAW

Oakland, CA-Oakland City Attorney John Russo announced a significant legal victory for the citizens of Oakland. Yesterday Alameda County Superior Court Judge James Richman upheld the City of Oakland's landmark anti-predatory lending ordinance against a challenge by the subprime lending industry. Judge Richman denied the motion by the American Financial Services Association (AFSA), a trade group for the subprime lending industry, for a preliminary injunction against the ordinance. Judge Richman ruled that AFSA was not likely to succeed in their claim that the Oakland ordinance was preempted by state lending laws. In ruling for the City, he stated that "the harm to the citizens of Oakland and the public weigh heavily in the equation." He also questioned the harm that the AFSA or its lender members would suffer if the ordinance went into effect and questioned whether AFSA has legal standing to sue on behalf of its members.

City Attorney John Russo underscored the importance of this win, saying, "Predatory lending is an unconscionable and malicious tactic that has no place in ethical banking practices. These practices deprive victims of home equity and lead to foreclosure, creating poverty and ultimately eroding the financial health of this City. I applaud the City Council for passing this cutting-edge ordinance, and I credit the court for acting on behalf of Oaklanders to preserve justice and fairness for all members of our community. I also want to acknowledge the outstanding efforts of Deputy City Attorney Dan Rossi and the law firm Cotchett, Pitre & Simon, who defended this important ordinance."

Oakland's predatory lending ordinance was unanimously passed by the Oakland City Council on October 2, 2001. It is the first local law in California to address the growing problem of predatory home mortgage lending. The ordinance prohibits a number of abusive lending terms and practices for home mortgage loans made in Oakland, particularly high-cost homes loans that charge high interest rates or points and fees. One of its most important aspects requires borrowers to receive independent loan counseling prior to closing a high-cost home loan. The City Council enacted the ordinance after hearing testimony from consumer groups and predatory lending victims on how unscrupulous lenders were targeting homeowners in Oakland's low-income and minority communities, particularly elderly persons living alone, for abusive loans.

Norma Garcia, senior attorney with Consumers Union in San Francisco, said, "In this ruling, Judge Richman affirmed the right of Oakland's citizens to protect themselves from predatory lenders. Until today, AFSA has successfully blocked other cities in this country from protecting their citizens from predatory lending practices. This ruling changed the course of this debate." Consumers Union has been active in supporting federal, state and local reforms in home lending.