The Real Shark Tank: What to Do If You’re the Victim of Predatory Lending
Being in debt can make you feel terrified, overwhelmed, and alone. But you’re not alone.
In fact, you’re in pretty good company. 80.9% of baby boomers, 79.9% of Gen Xers, and 81.5% of millennials are in debt at this moment. Unfortunately, knowing they’re not alone won’t stop some of these people from making some bad decisions.
While taking out a loan is often a smart way to help you get out of debt, if you don’t know what you’re doing, you could end up a victim of predatory lending. These unfair lending practices often force people further into debt.
If this sounds familiar, there are steps you can take. Keep reading to learn the difference between legal and unfair lending practices.
What Is Predatory Lending?
What is predatory lending? This happens when lenders impose unfair and even abusive loan terms on borrowers. Predatory lenders also falsely convince borrowers to accept unfair terms by using exploitative, deceptive, and coercive actions.
In the end, the borrower ends up with a loan they don’t need, don’t want, and often can’t afford.
Thankfully, even if you do fall victim to this unscrupulous practice, you can do something about it.
Examples of Predatory Lending
In order to avoid unfair lending practices, it’s important to know how to spot the red flags. We’ll go over some of them now.
However, you can also check with sources such as the FDIC if you feel a loan is “too good to be true”. They’ll have more information on the current federal predatory lending laws.
High Initial Fees
Before you hand over any of your money or sign any contract, always ask for a disclosure of all fees associated with the loan. Make sure you fully understand everything before you sign.
Especially since most borrowers don’t realize that there are fees associated with a mortgage, there are fees known as points.
Even if you have bad credit or financial struggles, you should aim to pay no more than two points on your mortgage. And if the lending company asks you to hand over hundreds of dollars for an application fee or other charges, shop around.
Payments are Set Extremely Low
Low monthly payments sound great. But read the fine print first.
You may have low monthly payments because you’re only paying interest on the debt. Another common reason for low payments with predatory loans is that the company will force larger lump-sum payments later on in the loan term.
Both scenarios mean inconvenience and more money to you. And if you can’t make those terms, you could wind up with even more debt or losing your home.
Obviously, interest rates vary depending on the loan type, loan terms, and even which lender you choose. But if your interest rates are really steep, it’s a red flag.
Yes, those with low credit ratings do tend to pay higher interest rates, but they’re reasonable based on your situation. Before you take on a loan, contact your accountant first.
Look out for language in your loan contract that makes it illegal for you to take further legal action for misrepresentation or fraud.
Not only is this a huge red flag, but if the lender does commit fraud, your only option at that point is arbitration. Usually, that puts you at a greater disadvantage.
Most of us love the thought of paying off our loans before the loan term is over. Some wish to refinance to get a better rate. Others want to sell their home.
Make sure you won’t incur a penalty for paying off your loan early.
Rushed to Sign Papers
If you feel rushed to sign papers before you’re ready, move on to another lending company. Never, ever sign anything you don’t understand or agree with.
Blank Spaces in Contracts
Blank spaces in contracts is not a good sign. In fact, do yourself a huge favor by having a lawyer look everything over first.
While it sounds great that certain lenders are willing to approve you regardless of your credit history or rating, it’s actually a red flag.
There are plenty of loans such as cash loans available for people with poor credit that are legal and safe.
How to Protect Yourself
The first thing to do to protect yourself against unfair lending practices is to do your homework. Find a few companies who provide loans and do a comparison.
Do a credit check on yourself so you know where you stand. This will help you understand what types of loans you actually qualify for.
Make sure the company and the representative are licensed to work as a lender.
Sue the Lender
If you can prove that your lender violated the Truth in Lending Act, you may be able to file a lawsuit. Suing predatory lenders isn’t easy but you can collect monetary damages if you win.
Keep in mind that while the Truth in Lending Act is federal, your state laws also come into play. Check with an attorney before you do anything.
Right of Rescission
You have the right to turn down a loan even after you sign the paperwork. With most loans, you have three days to make up your mind after you sign the documents.
Predatory lenders don’t usually adhere to the Truth in Lending Act requirements. Which means, if your lender didn’t provide you with a Notice of Rescission or you found errors in the notice, it’s not legally binding.
No Notification Means No Obligation on Your Part
And, if your loan closes without that notice, you have three years to rescind the loan agreement. What this means is that if your lender failed to provide you with proper notification of your rescission rights, you can legally walk away from your obligation.
And, if you choose to take them to court, you might even collect damages.
How to Stop Predatory and Abusive Behavior
It’s illegal for a lender to harass you for any reason. If you’re the victim of this type of behavior, submit a complaint to the Consumer Financial Protection Bureau (CFPB).
You can also contact your state’s attorney general.
If your personal information was compromised, visit the Federal Trade Commission’s website to help you deal with identity theft.
Where to Get Legal Help
If you suspect you’re the victim of predatory lending, don’t wait to contact a lawyer. Take action now to keep your money and your sanity safe.
If you don’t have a lawyer, we can help. Our directory can help you find the perfect attorney for your needs. Click here to find a qualified lawyer today.