Predatory Lending Practices Law and Legal Definition
Predatory" is a term used in lending contracts. Lenders following predatory lending practices target vulnerable consumers like women or those who do not qualify for conventional loans. Predatory lending has one of the following characteristics:
• The target group will be mainly the elderly or those with very low income.
• The cost or loan terms at closing are not what you initially agreed to.
• Aggressive sales tactics.
• Repeated refinancing options over short periods of time enabling the lender to collect additional/penal fee. This strips the homeowners' equity from their homes.
• The lending will not be in tune with the borrower's ability to repay. The lender's focus will be foreclosure.
• The borrower is blind to many underlying truths. There may be a lot of misrepresentations on the nature of loan, the amount of payment. The transaction will be packed with high fees which will be hidden from the borrower's eyes.
The aggressive sales tactics trick borrowers, mostly the uninformed groups, into accepting unfair loan terms. The federal remedies available to victims of predatory lending are: the Truth in Lending Act (TILA), the Real Estate Settlement Procedures Act (RESPA), the Home Ownership and Equity Protection Act (HOEPA), which is a 1994 addition to TILA, the Equal Credit Opportunity Act (ECOA), the Fair Housing Act, and the Federal Trade Commission Act. State remedies can be found in State Unfair and Deceptive Trade Practices Acts, common law fraud and unconscionability, and Special State Anti-predatory Lending Statutes.