Predatory lending is a significant issue in the United States and as the recession continues to worsen, more consumers are finding themselves with few other options. Predatory lenders take advantage of this, preying on people who are in financial distress and desperate for a loan.
Here’s what to know about predatory lending practices, what you can do to protect yourself, and how an experienced consumer protection lawyer can assist you.
Identifying Predatory Lending
There are many different types of predatory lending and manipulative lending practices that can be hidden in seemingly straightforward agreements. Here are some common examples of this type of fraud and how to identify it:
Bait & Switch
Bait and switch occurs when a consumer is lured in by an advertisement or sales pitch for a product or service that the seller does not intend to provide. Most often, this involves advertising a low-cost item, but then attempting to sell the consumer a more expensive one.
For example, a predatory lender may advertise “no credit check” loans, but then require borrowers to undergo a credit check only after they have applied for the loan.
Concealed Balloon Payments
A balloon payment is a large payment made towards the end of a loan, either for the last several payments or one lump-sum payment at the end. They’re frequently used in conjunction with adjustable-rate mortgages and can make it difficult for borrowers to keep up with their monthly payments.
If you are considering an adjustable-rate home loan, be sure to ask your lender if there will be any balloon payments required at the end of the loan’s term.
Excessive Late Fees or Interest
Late fees and interest are common charges that lenders assess when borrowers make late payments on their loans.
While some late fees and interest charges are reasonable, others can be excessive – especially if they are significantly higher than what was originally disclosed to the borrower. If you think that the late fees or interest being charged on your loan are above what you were originally quoted, you may be a victim of predatory lending practices.
Loan packing is a tactic used by some lenders in which unnecessary products or services are added onto a loan to increase the profit margin for the lender. Common examples of “loan packing” include adding credit insurance even when the borrower declines, or charging origination fees that were not disclosed upfront.
Loan flipping occurs when a borrower is persuaded to refinance their loan multiple times in quick succession. Each time the loan is refinanced, the borrower is charged additional fees and closing costs. This can leave the borrower “upside down” on their loan, which means they owe more money than what their home is worth.
If you are being pressured to refinance your loan, be sure to ask about all of the potential fees and costs associated with the new loan before you agree to anything.
Protect Yourself From Manipulative Lenders
If you believe you have been a victim of predatory lending, it is important to report the lender to the Consumer Financial Protection Bureau (CFPB). This is a government agency that protects consumers from unfair, deceptive, or abusive practices by banks and other financial institutions.
If you want to file a formal complaint with the CFPB, you can:
- Call 1-855-411-2372
- Submit a complaint online at consumerfinance.gov/complaint
When filing a complaint, be sure to include as much information as possible about the lender and your experience. This will help the CFPB investigate your claim and take action against the lender if necessary.
Reach Out to a Consumer Protection Attorney
Another option for fighting back against predatory lenders is to reach out to a consumer protection attorney that specializes in helping people who have been victims of fraud or other unfair business practices. A lawyer may be able to help you recover damages from the lender and put an end to their predatory lending practices once and for all.
Contact Mazow | McCullough, PC For Help Today
Predatory lending is a serious problem that can leave consumers in a difficult financial situation. If you think you may be a victim of predatory lending, you should take immediate action to protect yourself. At Mazow | McCullough, PC, we have the skills and experience to represent you and go up against the large legal teams often hired to cover for unscrupulous lenders.
Don’t allow a predatory lender to take advantage of you. Fight back against these manipulative practices and get the help you need to recover from any damage that has been done to your finances. Call now for a consultation to discuss your case in detail by dialing our Salem, MA office at (978) 744-8000 or toll free at (855) 693-9084.