The Maryland Senate gave preliminary approval yesterday to a bill that would allow state-chartered banks to continue to offer a type of home equity loan the state's highest court previously ruled was in violation of consumer protection laws.
Sen. Thomas "Mac" Middleton, chairman of the Finance Committee, said that the court had erred in its ruling and that the legislature often steps in to clarify the law. The Senate might take a final vote on the bill this week; the House of Delegates unanimously approved similar legislation last week.
The bill has been the subject of intense lobbying, and some lawmakers said yesterday that the bill gave them "heartburn." The Peter G. Angelos law firm, known for its class actions against tobacco and asbestos companies, opposed the bill. The Maryland Bankers Association, a trade group that frequently works with Middleton's committee, supported it.
The Angelos firm brought a lawsuit over the home equity loans offered by Provident Bank under which borrowers were charged closing costs, which had been waived at signing, if they paid off the loan early. The Court of Appeals ruled in December that those charges constituted illegal prepayment penalties.
Some lawmakers argued that the legislation is ill-timed, with the nation facing a foreclosure crisis stemming from bad loans.
Middleton, a Southern Maryland Democrat, and other lawmakers argued that the terms of these loans actually benefit consumers because they enable borrowers to avoid paying closing costs, which can be hundreds of dollars. The bill also would limit liability for lenders in certain instances, and potentially save Provident, which had obtained regulatory approval to offer the loans, from having to pay millions of dollars in penalties in the court case.
Senate President Thomas V. Mike Miller said he reluctantly backs the bill. "I'm going to make their sins right, but it gives me great heartburn," he said.
laura.smitherman@baltsun.com
