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DEBATE, PERSUADE, INFORM How to Recognize Predatory Lending
Predatory lending describes a variety of lending practices that are very disadvantageous to borrowers. Predatory creditors use fraudulent or deceptive practices to get people to borrow money. They manipulate borrowers into accepting unfair loan terms by using aggressive sales tactics. Some common predatory lending tactics include: Asset-based Lending. This is when the creditor makes a loan based on the assets of the borrower, overlooking the borrower’s ability to repay the obligation. For example, the borrower may own a home with some equity, but be out of work and obviously unable to repay the loan. As a result the borrower defaults and, if they have used their home as collateral, can lose the home in foreclosure. Loan Flipping. This is when a creditor induces a borrower to refinance (renew or extend) a loan over and over. The borrower is repeatedly charged high points and fees each time the loan is refinanced, which continually increases the loan balance, making pay off nearly impossible. Concealment. This is when a lender uses fraud or deception to conceal the true nature of the loan from an unsuspecting or unsophisticated borrower. For example, a predatory creditor may provide confusing loan repayment instructions then charge a high penalty fee when the payment is late. Predatory lenders have been known to convince a borrower to sign an incomplete loan application then later insert onerous loan terms into the document. A consumer’s lack of financial literacy makes them more vulnerable to abusive lending practices. Predatory lenders take advantage of a borrower’s lack of understanding about loan terms and finance. They often target lower-income, minority borrowers, and the elderly. Predatory lending is often associated with payday loans. Victims of predatory lending typically suffer from a lack of understanding of the lending process in general. They fail to understand the specific terms and obligations of the loan they are entering into. You will not be a victim of predatory lending! Your job is to research how to: a. recognize predatory lending tactics b. protect yourself and your family from predatory lenders; and c. report predatory lenders to the proper authorities. Consider using Visme (visme.co) to Create a poster, brochure or infographic to educate your family and vulnerable members of your community on predatory lending. PRODUCT PREVIEW
Chapter 13 | Credit Card Craze 252
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