Civil Rights Coalition Opposes Mandatory Arbitration and Applauds Freddie Mac
Speech by Wade Henderson - December 9, 2003
I'm Wade Henderson, the executive director of the Leadership Conference on Civil Rights – the nation's oldest, largest, and most broad based civil rights and human rights coalition.
The Leadership Conference on Civil Rights is committed to the protection of civil rights for all, and we're proud of our legacy of bringing diverse groups together to find workable solutions to our shared problems.
Over the years, we've had to fight for basic civil rights in our schools, at lunch counters and on buses. Today, the fight occurs on different fronts, but we're still fighting for the same principles. Whether it's at the loan officer's desk, in a FICO score or on a redliner's map, we must build awareness about the need for equal opportunity and fair access to capital. When we empower families to become homeowners, when we help them to build and retain wealth, we help fulfill the promise of the American Dream – and we honor the spirit of the enduring struggle to become a part of the American mainstream.
For this reason, we applaud Freddie Mac's decision to fight predatory lending and to ban the purchase of subprime loans that include mandatory arbitration clauses. Unscrupulous lenders have used mandatory arbitration requirements to effectively cut out individuals' rights to pursue their legitimate claims in court. Mandatory arbitration often limits or eliminates essential procedural protections for plaintiffs. Moreover, arbitration is not subject to the procedural safeguards of court or to federal evidentiary rules. Arbitrators don't have to know or follow the law and do not have to justify their rulings or issue written opinions. Arbitration often insulates predatory companies, and requires consumers to pay for the process.
While more Americans own their homes today than any time in our history, minorities and others who historically have been under-served by the lending industry still suffer from a significant homeownership gap. Unequal homeownership rates cause disparities in wealth since renters have significantly less wealth than homeowners at the same income level. To address wealth disparities in the United States and make opportunities more widespread, it is clear that homeownership rates of minority and low-income families must rise. Increasing homeownership opportunities for these populations is therefore central to the civil rights agenda of this country.
Increasingly, however, hard-earned wealth accumulated through owning a home is at significant risk. The past several years have witnessed a dramatic rise in harmful home equity lending practices that strip equity from families' homes and wealth from their communities.
Today, predatory lending and the practices that support it are one of the greatest threats to families working to achieve financial security. These tactics call for an immediate response to weed out those who engage in or facilitate predatory lending, while allowing legitimate and responsible lenders to continue to provide necessary credit.
Subprime lending has been a gateway to homeownership for those who had been shut out of the traditional marketplace. But we cannot let the subprime sector be defined by its worst elements. The persistence of unscrupulous lending practices – often targeting specific social groups such as the elderly; members of minority groups; lower-income borrowers; and female single-heads of households– taints the entire industry. Freddie Mac's decision is an important step in helping the market work more fairly
Making the marketplace work for everyone – with fair standards and effective safeguards – must be an important part of our generation's social legacy.
Thank you.
