FDIC:Predatory Lending Resources (2024)

FAQs

How do you prove predatory lending? ›

In California, all you have to show to prove that predatory lending took place is that your lender had reason to believe that you could not afford your loan amount. You can use a violation of predatory lending law as grounds to rescind your loan or as a formidable defense against foreclosure.

The FDIC combats predatory lending by: stopping abusive practices through the examination process and supervisory actions; encouraging banks to serve all members and areas of their communities fairly; and providing information and financial education to help consumers make informed choices from the wide array of ...

If you suspect you've been a victim of predatory lending, contact the CFPB and your state consumer protection organization. The CFPB has a portal where you can submit a complaint and can also be reached by phone on weekdays at 855-411-2372. Be vigilant when it comes to taking out a mortgage or any other type of loan.

Look for high or hidden fees.

High interest rates and other fees are common tactics used to take advantage of borrowers. Be sure to read through the terms and conditions and look for sections that list the fees, penalties, and payment details.

Often, these practices are targeted at certain borrowers based on their race, ethnicity, age, or gender, which is both discriminatory and illegal. If you've been subjected to predatory lending practices, you have the right to get your money back and hold the predatory lenders accountable for their actions.

If the CFPB detects predatory, unfair, or abusive practices like high interest rates or hidden fees, it takes action against those lenders. It was created in 2011 after the 2008 financial meltdown to tell consumers “We've got your back.”

What is it? Predatory mortgage lending, whether undertaken by creditors, brokers, or even home improvement contractors, involves engaging in deception or fraud, manipulating the borrower through aggressive sales tactics, or taking unfair advantage of a borrower's lack of understanding about loan terms.

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.

Predatory lending is frequently directed to those with challenges making informed decisions, specifically older adults, families with limited means, minorities, immigrants, individuals with bad or no credit, and individuals with disabilities.

What type of homeowner is a frequent target of predatory lending? ›

Homeowners in certain communities, particularly the elderly and minorities, are especially likely to be targets of predatory lending but almost anyone can fall prey to abusive lending practices.

400% The annual percentage rate (APR) that payday loans often approach—one reason these loans are considered predatory products.

Review the loan documents carefully. The Truth in Lending Disclosure has the basic terms and conditions of the loan. Make sure it lists the interest rate and monthly payments you were promised. The Settlement or Closing Statement shows the fees you are being charged for the loan.

How loan flipping works. The typical situation involves a lender that coaxes and convinces a homeowner to repeatedly refinance their mortgage while also persuading them to borrow more money each time.

If You Think You are a Victim of a Predatory Loan… Contact an attorney. Most communities have offices that provide free legal services to individuals with limited income.

Simply put, predatory lending becomes a crime in California when the lender manages the loan transaction to extract the maximum value for itself without regard for the borrower's ability to repay the loan.

It is common for you to pay only one percent of the loan amount for prime loans. By contrast, a typical predatory loan may cost five percent or more.