These laws cap interest rates, ban discriminatory practices, and even outlaw some types of lending. While Congress has passed some federal credit laws, many states have taken the initiative to rein in predatory lending. 2 With both the rules and credit products constantly evolving, it’s important to familiarize yourself with the latest regulations.
But a great deal of predatory lending is carried out by more established institutions such as banks, finance companies, mortgage brokers, attorneys, or real estate contractors.
It's not always easy to tell. Subprime mortgages, which are offered to borrowers with weak or “subprime” credit ratings, aren’t always considered predatory. The higher interest rate is seen as compensation for subprime lenders, who are taking on more risk by lending to borrowers with a poor credit history.
What is 'Predatory Lending'. Predatory lending includes any unscrupulous actions carried out by a lender to entice, induce and assist a borrower in taking a loan that carries high fees, a high-interest rate, strips the borrower of equity or places the borrower in a lower credit rated loan to the benefit of the lender.
Federal laws protect consumers against predatory lenders. Chief among them is the Equal Credit Opportunity Act (ECOA). This law makes it illegal for a lender to impose a higher interest rate or higher fees based on a person's race, color, religion, sex, age, marital status or national origin.
the Federal Reserve Board§ 1639(b) (Dodd-Frank Act § 1403). Further authority to prohibit deceptive, unfair or predatory loan terms is given to the Federal Reserve Board, which can regulate all residential mortgages to ensure that terms are in the interest of consumers and the public.
Local and state governments can be great agents in stopping the incidents of predatory lending. By enforcing existing laws more fully and making new mandates against predatory lending practices, these fraudulent loans can be stopped.
What is fair lending? Fair lending prohibits lenders from considering your race, color, national origin, religion, sex, familial status, or disability when applying for residential mortgage loans. Fair lending guarantees the same lending opportunities to everyone. Is there a law that protects my fair lending rights?
The Dodd–Frank Wall Street Reform and Consumer Protection Act (commonly referred to as Dodd–Frank) is a United States federal law that was enacted on July 21, 2010.
Terms in this set (13) Predatory lending. Occurs when a financial institution dishonestly induces a customer to undertake a loan that the consumer is not qualified for or in other ways manipulates the borrower and the loan to the disadvantage of the consumer.
Examples of predatory lending could include high late fees, penalty interest rate or even seizure of loan collateral (like repossessing a car). Predatory lending practices can be found at any point in the loan-buying process, from false advertising to high-pressure sales tactics to an unaffordable free structure.
Answer: “Predation can arise when a lender has extra, private information about a borrower's prospects” for keeping up with payments.
Report Abusive Lenders Report your experience to the Federal Trade Commission. It watches out for predatory lending scams and frauds. Call toll-free 1-877-FTC-HELP (382-4357), Write to Federal Trade Commission, CRC-240, Washington, D.C. 20580.
A number of federal statutes seek to promote fair lending. For example, the Home Mortgage Disclosure Act ("HMDA"), 12 U.S.C. 2801 et seq., seeks to prevent lending discrimination and redlining by requiring public disclosure of certain information about mortgage loan applications.
The courts have recognized three methods of proof of lending discrimination under the ECOA and the FHAct: Overt evidence of disparate treatment; • Comparative evidence of disparate treatment; and • Evidence of disparate impact.
The Fair Lending Program prohibits lenders from using discriminatory practices. The Fair Housing Act prohibits discrimiation against people who are looking to rent, purchase or finance a home.