ELCA Advisory Committee Examines Fair and 'Predatory Lending'

CHICAGO (ELCA) -- The Evangelical Lutheran Church in America (ELCA) advisory committee on corporate social responsibility discussed fair lending and "predatory lending" when it met here Feb. 2. Members heard presentations on various lending practices of U.S. financial institutions and how to identify abuses.
John E. Lind, executive director, California/Nevada Interfaith Committee on Corporate Responsibility (CANICCOR), San Francisco, told the committee to separate any discussion of differences between prime and subprime lending and of differences between predatory and subprime lending.
CANICCOR serves as a consultant to institutional investors on the social responsibility of financial institutions. It provides information to funds that have social screens, and it provides analysis for and coordination among institutional investors that take an active role with the corporations in which they invest.
Lind described prime lending as "conventional" lending. Subprime lending requires more evaluation of the borrower's creditworthiness, he said. Subprime "interest rates are higher because of the higher risk caused by the poorer creditworthiness of the borrowers."
Subprime lending serves a valuable purpose for those unable to secure a conventional loan, said Lind. Subprime lending is neither good nor bad, he said, but it is "the primary place where predatory lending operates."
Lind provided the committee with several characteristics of subprime lending that stockholders and "watchdog groups" could monitor for signs of abuse, such as a financial institution approving a loan based on the value of the collateral rather than on the borrower's ability to repay the loan.
Edward M. Gramlich, a member of the Board of Governors of the U.S. Federal Reserve System, Washington, D.C., addressed advisory committee members in a closed session* with trustees of the ELCA Board of Pensions who met here Feb. 2-4. The nonprofit Board of Pensions, based in Minneapolis, manages $6 billion to provide pension and other benefits for 48,000 pastors, lay leaders and employees of the ELCA and their families.
Through the advisory committee, the ELCA Division for Church in Society (DCS) counsels various institutions of the church about the social records of corporations in which they hold stock. In some cases, shareholder resolutions may be considered to effect change in the corporation's practices.
In January 2000, the ELCA advisory committee set its two-year priorities -- areas in which to focus its energies as it considers shareholder resolutions and the practices of U.S. corporations. The priorities are equity in the workplace, fair lending and community reinvestment, elimination of land mines and care of the environment.
Generally, resolutions are filed with corporations before the end of each year in preparation for stockholder meetings to be held the following spring. Many resolutions are withdrawn before reaching the stockholder meetings because they prompt significant dialogue between the filer and the corporation's management.
Trudy A. Brubaker, ELCA director for corporate social responsibility, briefed the committee on the status of resolutions filed with corporations in the past year. Resolution topics included endorsing principles for public environmental accountability and avoiding securitization of predatory loans.
In 2000, the ELCA joined with other churches and organizations to ask AT&T to reconsider its decision to carry the Hot Network on its cable television service. The ELCA holds stock in AT&T but protests its association with the adult film network, said the Rev. James M. Childs Jr., DCS board chair, Columbus, Ohio.
A shareholder resolution was written and filed with AT&T by several members of the Interfaith Center on Corporate Responsibility (ICCR). About 275 religious organizations, including the ELCA, coordinate their corporate social responsibility efforts through ICCR. The ELCA did not file the AT&T resolution partly because it was written and filed before the church could approve its involvement. The advisory committee adopted a new annual time line for its work that will make it possible for the ELCA to prepare timely resolutions for ICCR consideration. The committee reviewed drafts of shareholder resolutions on diversity on the board of directors and global warming. Members discussed points that could be made in resolutions on environmental justice and environmental racism. The next meeting of the advisory committee on corporate social responsibility will be here Aug. 25.

[ * Gramlich's presentation was made in a closed session to avoid
conflict with any matters of litigation that are or may be brought
before the Board of Governors. For Gramlich's thoughts on predatory
lending, please see
http://www.federalreserve.gov/boarddocs/speeches/2000/20001206.htm
for his remarks Dec. 6 at a conference in Philadelphia. ]

For information contact:
John Brooks, Director (773) 380-2958 or NEWS@ELCA.ORG
http://listserv.elca.org/archives/elcanews.html