Predatory Lending

What is Predatory Lending?

Predatory lending" refers to a variety of lending practices that may be disadvantageous to borrowers. This happens when lenders use unfair, deceptive or fraudulent practices to manipulate borrowers through aggressive sales tactics, or take unfair advantage of a borrower's lack of understanding about loan terms. While predatory lenders are most likely to target the less educated, the poor, racial minorities, and the elderly, victims of predatory lending are represented across all demographics.

Predatory lending typically involves at least one, and perhaps all three of the following elements: 

• Making unaffordable loans based on the assets of the borrower, rather than on the borrower's ability to repay an obligation.
• Convincing a borrower to refinance a loan repeatedly in order to charge high points and fees each time the loan is refinanced.
• Engaging in fraud or deception to conceal the true nature of the loan obligation from an unsuspecting or unsophisticated borrower.