New Jersey’s Model Response to Predatory Lending


As widespread media coverage has documented, predatory home lending practices have become rampant throughout the country and, notably, among low-and moderate-income and African American communities in New Jersey. Our article analyzes this emerging problem as a sometimes devastating side effect of the rapid increase in American home ownership, an otherwise almost completely desirable phenomenon.

Because predatory lending has been so difficult to define, states have struggled to regulate it. New Jersey, building on the work of a few other leading states, has drafted what many consider to be the new standard for predatory lending legislation, the Home Ownership Security Act. Our article places the Act in the context of governing federal law and industry practice. Such legislation is, however, quite complex and the product of significant legislative compromise, resulting in certain ambiguities that our article documents and seeks to resolve.

Our article will help the relatively new scholarly debate regarding predatory lending to move forward by highlighting the inherent tension between increasing consumer protections and preserving vibrant consumer credit markets. We conclude that while the Act achieves a reasonable balance between the two goals, it could have gone even farther in promoting consumer protection interests.

Our article also will be a definitive resource for attorneys and judges as they attempt to understand and employ this complicated and extraordinarily important law.


Banking and Finance Law

Date of this Version

September 2003