In 2002, the Florida Legislature passed the Florida Fair Lending Act. Codified in Chapter 494 of the Florida statutes, the law prohibits certain aggressive and deceptive loan tactics on certain home loans. To be subject to the act, the loan must be a conforming home loan under Fannie Mae definitions and less than $300,000.
Prohibited Acts
The Florida Fair Lending Act prohibits 14 types of predatory lending practices on conforming home loans. These include charging prepayment penalties after the first three years, increasing the interest rate on loans going into default, balloon payments on loans less than 10 years, charging late fees in excess of 5 percent of the overdue payment and refinancing the loan in the first 18 months unless it benefits the borrower. The law also prohibits extending credit without regard to the borrower's ability to pay, requiring full payment of a loan when the borrower has otherwise complied with the terms of the loan and offers to originate a loan at the borrower's home without an appointment.
Required Disclosures
The Florida Fair Lending Act also requires lenders disclose certain facts about loans before closing. Within the three days before the deal is closed, lenders must inform borrowers that their homes can be lost in the event of foreclosure, that interest rates and terms can vary, that borrowers should consider consulting a credit counseling agency or a financial adviser before taking on a home mortgage and that they do not have to accept the loan even if they've filled out the application. The borrower must also be notified that debt consolidation may be available as a useful way to simplify repayment. In addition to these initial disclosures, lenders must notify borrowers of any changes to the loan terms at least three days before taking effect.
Enforcement
The penalty for violating the requirements of the Florida Fair Lending Act is the forfeiture of any interest to be collected under the terms of a loan. The lender can only collect the principal of the loan without any interest. The exception to this penalty, however, is any bona fide error made by the lender that is corrected within 60 days of receiving notice from the borrower. Bona fide errors include clerical or calculation mistakes, computer malfunction and printing errors. If the lender was acting in good faith, but failed to comply with the law because of a bona fide, error, the penalty will not be applied.
