New Century Adopts Preemptive Rules

Hoping to head off calls for tighter regulations and new laws protecting borrowers with poor credit or low income, one of Orange County’s larger sub-prime lenders has voluntarily adopted guidelines designed to safeguard consumers.

New Century Financial Corp. in Irvine announced the policies amid a brewing storm in its industry. Numerous legislators and regulators are pushing for laws to outlaw predatory lending practices, such as charging excessive loan fees.

Among the changes, New Century said it plans to:

* Implement a computerized loan-approval system so decisions are made without regard to race, age or gender.

* Retain an outside consultant to review the company’s policies and practices and recommend improvements.

* Expand into traditional prime mortgages so qualifying borrowers can receive cheaper loans.

* Offer rate reductions and other financial incentives for borrowers who make their payments on time.

* Stop making so-called Section 32 loans, which carry interest rates above 15% and fees equal to 8% of the loan amount. Such loans require special government disclosures to borrowers.

Several of New Century’s competitors have landed in hot water recently over their lending practices, most notably Irvine-based First Alliance Corp., which filed for Chapter 11 bankruptcy last month.

“These practices have eroded the public’s confidence in many lenders or brokers operating in the sub-prime lending industry,” said Robert Cole, chairman of New Century.