What Is Predatory Lending and How to Address It
When you’re desperate for money, you may become more willing to suspend disbelief and caution. Loans are not created equal and on occasions, lenders may even attempt taking advantage of those in need. In such instances, we’re talking about predatory lending.
What Is Predatory Lending?
Predatory lending refers to reliance on dishonest, misleading and even scammy practices in order to get people signing up for a loan. Usually, predatory lending targets individuals who have a poor credit and a limited access to other financial tools.
A predatory lender could apply automatic hidden charges and fees that weren’t discussed in advance. Other predatory practices include:
- Charging a higher interest rate
- Using pressure tactics to convince potential clients to sign up for financing
- Misinforming potential clients, telling them that they can’t get financing anywhere else
- Providing a highly time-constrained offer (available today, gone tomorrow)
- Convincing clients to refinance a mortgage without providing significant financial benefits
- Adding unnecessary insurance policies to the product
- Imposing harsh payment penalties whenever conditions aren’t being met
Common Warning Signs
Even if you are desperate to get money, you should still go through the terms and conditions carefully before signing anything. A loan that appears too good to be true probably is and it will end up costing you a lot in the long run.
Speed and convenience come with high fees. You may even be forced to give up assets. A company that promises to give you a cheap loan, regardless of your poor credit history, should raise a red flag.
Another warning sign is a complex loan and fee structure. Whenever a lender makes it almost impossible for you to understand the fees and charges upfront, chances are that you’ve come across a predatory lender.
In Arizona, just like in the rest of the US, lenders are required by law to state the loan’s interest rate and upfront fees. If such information is missing, you should look for an alternative.
A final thing to keep in mind is that you shouldn’t feel pressured to sign anything immediately. Predatory lenders will discourage you from shopping around. You will either be told that your credit score doesn’t qualify you for other options or that you’re getting an exclusive one-time deal. Don’t fall for such tactics. If you do a bit of research, you’ll come across loans that feature more favorable terms and conditions.
What to Do about Predatory Lenders?
Unfavorable loans aren’t the only option you have. If you talk to an Arizona bankruptcy attorney, you’ll get to explore possibilities like a bankruptcy filing or debt settlement. Both of these options will reduce the financial burden instead of getting you into bigger trouble.
If you have already become the victim of predatory lending, you can do a couple of things.
Those who realize the fact quickly can utilize their right of rescission. The Truth in Lending Act (TILA) enables US citizens to turn down a loan in the three days following the signing of the paperwork. This right should be highlighted on the contract you’ve signed with the lender.
Alternatively, you should consider suing the lender. Show the contract to an experienced attorney. Any TILA violation will give you a chance to take the predatory lender to court. TILA is a federal law but it will come into effect in Arizona. A lawyer will also pinpoint the local regulations that could enable you to seek justice in court.
Remember that regardless of the situation and its severity, there’s always a way out. Predatory lending is going to get you into even more financial trouble. Instead of rushing into an impulsive decision that you’ll regret, take some time to think about it. A bit of caution can save you a lot of money in the long run.
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