Predatory lending refers to the abusive practices of the loan lenders. These lenders actually deceive the borrowers and earn money. The predatory lending can also be termed as planned violation of rules and regulation that is related to the loan industry. The predatory lenders provide wrong information to the borrowers before signing documents and once the documents are signed, the borrowers are literally trapped. Predatory lending denies the borrowers from their enjoying home equity value and at the same time, the borrowers sometime face foreclosure for the same lending practices.
The problem of predatory lending is not only related to the mortgage loan sector but it is a major concern for the borrowers of several other loans like payday loans, overdraft loans and so on. On the other hand, there are several credit cards and various other types of debt programs where the interest rates are more than average.
Cases of predatory lending occur mainly with the less educated persons because the terms are conditions are not understood properly by these people and the loan lenders get the chance to victimize these people through their cunning practices.
Again, the racial minorities and the elderly people are also the soft targets for the predatory lending practices. These types of incidents can be seen in such cases where the loan amount is secured by any kind of collateral. It may be a real estate property or any other property. Predatory lenders always try to take possession of these properties and make huge amount of illegal profit.
A number of lending practices are under analysis and are believed to be predatory lending practices by the consumers. On the other hand, these practices are defended by the lenders and that is quite obvious. The debates on these practices are still going on. Some of these practices are the following:
Credit Insurance Paid in Single Premium
High Prices on Short-Term Loans
The US government has passed a number of anti-predatory laws to handle the illegal practices of loan lenders. Laws like Federal Truth in Lending Act, Home Ownership and Equity Protection Act are some of those laws that are used to control the predatory lending practices.
Last Updated on : 1st July 2013