The recession that started in 2008 hit a lot of Americans hard. Millions of people lost their jobs and their homes when the bottom fell out of the economy — and that happened in no small part due to the rise of predatory lending practices, including the subprime mortgage industry.
Some lenders used misleading and deceptive practices to convince people to take out loans they couldn’t afford, and a lot of people ended up bankrupt or in foreclosure when they couldn’t pay or when promises that they would be refinanced never materialized. The ripple effect that started when the bubble from these unsustainable loans burst has touched the entire American economy for years.
Types of Predatory Lenders
While a lot of attention in recent years has been focused on predatory mortgage lenders, predatory lenders can take a variety of forms. A predatory lender is any kind of lender that uses tactics or practices that are unfair or abusive to borrowers. Predatory lenders may include those who offer:
- High-interest rate mortgages or home equity loans
- Payday or cash advance loans
- High-interest car loans
- Car title loans
- Personal loans
- Credit cards with high interest rates or high up-front processing fees
- Tax refund anticipation loans
Predatory lenders tend to target people who have trouble getting credit because they are low-income or have poor credit history. Often they target people who are desperate because they’re facing a financial emergency or have some short-term credit need, such as to pay a big medical bill or car repairs.
Research shows that predatory lenders also tend to target senior citizens who might be easily confused by predatory loan terms, and minorities who often may be low-income and think they’re unable to get credit otherwise.
Practices Used By Predatory Lenders
There are a variety of tactics and practices that predatory lenders use to manipulate people into agreeing to expensive loans and unnecessary fees. Some are illegal, but some are merely unethical — and if you agree you soon may find yourself underwater financially. Warning signs that a lender may be engaging in predatory practices include:
- Misrepresenting the costs of credit or failing to provide a Truth in Lending statement
- Building balloon payments into the loan or ramping up interest rates to artificially keep payments low early in the repayment cycle and telling you that you’ll be able to refinance before the payments become unaffordable
- Changing the loan terms after making the initial credit offer
- Charging exceptionally high interest rates
- Making loans regardless of the person’s ability to pay
- Inflating the costs of the loan, such as closing costs or document fees
- Adding financial products you don’t need into the cost of the loan, a practice otherwise known as loan packing
- Refinancing your loan at a higher interest rate or higher payments through a practice known as loan flipping
- Charging higher rates to people in a particular neighborhood regardless of their credit worthiness or ability to pay
- Charging excessive prepayment penalties for paying the loan off early
- Paying a fee known as a “yield spread premium” to a broker that convinces you to enter into a loan at a higher interest rate when you actually qualified for a lower rate
- Using aggressive sales tactics or deception to get you to agree to a loan with abusive terms and failing to tell you that you could qualify for better terms
How an Ohio Consumer Lawyer Can Help
If you believe you’ve been the victim of a predatory lender in Ohio, you have a number of rights under both federal and state laws. The laws that apply will depend on the nature of the loan, the loan terms, and the practices used by the lender. An experienced Ohio consumer lawyer can look at your loan documents, listen to your story, and talk to you about your options. You may be able to file a lawsuit to recover compensation for the losses you incurred because of the predatory loan.
A lawyer also may be able to help if you’re experiencing financial stress because of your encounter with a predatory lender. A debt help lawyer may be able to look at your finances and negotiate with your creditors to help you get your debt under control and make your payments fit within your budget.