Predatory lending is defined by the FDIC as the act of "imposing unfair and abusive loan terms on borrowers" and the loans are disadvantageous to borrowers. The lenders utilize aggressive mail, phone, TV, and other forms of advertising with promises of loans to get out of debt, or a false interest mortgage rate on a home loan, fast cash till the next paycheck comes in, or other methods of luring in uneducated or unsuspecting borrowers.
Anyone can become a victim of predatory lending. Lenders convince borrowers to agree to loan terms that can make it difficult to repay the loan or defend against it when necessary. If you are a victim of predatory lending or you suspect that your lender used abusive lending practices, you should seek legal advice from an experienced debt collection defense attorney.
The Law Office of Michael P. Forbes, PC is dedicated to helping clients achieve the best possible results. My firm has helped clients facing foreclosure, repossession of their cars, or other circumstances due to predatory lending.
Predatory lenders use some form of unfair, deceptive, or fraudulent means during the time of the loan origination. The types of loans usually associated with abusive lending practices are payday loans, credit cards, subprime loans, car loans, and overdraft loans.
In most circumstances, the loan is made based on collateral and the lender stands to benefit greatly if the borrower is unable to meet the terms of the financial obligation. They benefit when they can foreclose or repossess the collateral such as a house or automobile. Another loan that can in the end cost more than the actual money borrowed is the payday loan.
What Are Payday Loans?
Payday loans or cash advance loans are a way to get emergency funds until the next paycheck. If the borrower cannot repay the loan and abide by the terms, the interest rate and late fees can grow quickly and the borrower may pay 100% or more over the life of the loan. They are short-term high interest loans.
Often the practice of predatory or abusive lending makes the interest of a loan appear lower while making it appear that the borrower's ability to repay the loan is greater than it actually is. The outcome can be financially damaging to the borrower. Predatory lenders target mostly the less educated, poor, elderly, and racial minorities although anyone can fall prey to their abusive tactics.
Illegal and Abusive Lending Practice
The predatory lending practice can consist of the following:
Using the assets of the borrower for the basis of the loan without consideration as to whether the borrower can repay the financial obligation
Luring a borrower to refinance a loan repeatedly with profit to the lender through points and fees with each refinance
The use of deception or fraud to hide the real nature of the loan from borrowers who are unsuspecting or uneducated or the sought after targeted borrowers
Common Types of Predatory Lending
Following are some types of predatory lending practices:
Mandatory Arbitration Clause - borrower is limited in recourse against the lender
Loan Flipping - The lender flips the loan and each time points and fees are added to the loan
Equity Stripping - Lender makes the loan against equity regardless of ability of the borrower to repay the loan
Hidden Balloon Payment -The borrower learns at closing that the loan is short term although the borrower applied for a low monthly payment/low interest loan
Bait and Switch - The lender makes a different loan from what was promised
Packing - The lender adds items such as credit life insurance and makes the borrower think the additions are needed in order to get the loan
Having an attorney represent you in actions against your lender for predatory lending practices can make a difference in the outcome of your case. If you were a victim of predatory lending in Pennsylvania, call the Law Office of Michael P. Forbes, PC today for help.
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