Yesterday's announcement that Standard and Poor's Rating Services will require additional credit enhancement for certain loans governed by anti-predatory lending laws is likely to mean an increase in lenders who no longer offer certain loan products in the states and cities affected by the new requirements. Some of these lenders may exit these markets altogether, seriously diminishing credit options for needy borrowers.

Standard and Poor's, which recently completed a year-long review of more than 40 distinct federal, state and municipal anti-abusive lending laws, cites subjective or unclear standards for determining which loans are predatory, including the demonstration of an undefined tangible net benefit, as the reason it believes that it must move to mitigate the risk to investors in mortgage backed securities. AFSA has long campaigned on these very issues, warning of the reaction of agencies such as S&P and the follow-on effect for the lenders who rely on them.

"S&P's decision comes as no shock—indeed we have been predicting such a reaction for some time," said AFSA president and chief executive officer Randy Lively. "We have seen the effects of these overreaching laws in a number of states and municipalities around the nation. They have a profound negative social and economic impact and usually end up hurting the very people they were supposed to protect.

"Nowhere was this negative impact felt more than in Georgia last year," he continued, "A flawed law containing assignee liability provisions and requiring the demonstration of an undefined tangible net benefit, proved so catastrophic that certain provisions had to be repealed within six months. Now we are seeing similar laws in places like New Jersey and New Mexico and can expect similar effects."

AFSA believes that supporting the enforcement of existing laws and increasing financial literacy programs which give individuals the skills they need to make sound financial decisions are the most effective ways to protect the vulnerable from unscrupulous lenders.

Founded in 1916 and based in Washington, D.C., AFSA is the national trade association for finance companies, "captive" auto finance/leasing companies and other market funded financial services firms that lend to consumers and small businesses.