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Faxless Payday Loan Archive

Predatory Loans

Family wealth, homeownership benefits and foreclosure are some of the results of predatory mortgage lending. Estimates show that lending costs Americans greater than $9.1 billion dollars a year, according to the Center for Responsible Lending.

Abusive lending targets people with weak or bad credit records and happens in the subprime market. Typically, a predatory mortgage is a refinance of a loan that is already existing. It is usually full of excessive or unwanted fees and offers no concrete advantage to the borrower.

The bad thing is many of these loans are legally perfect and more often than not targets some of the most vulnerable citizens. The Center for Responsible Lending is coordinating with policy makers, civil rights leaders, and consumer advocates to initiate public policies in order to provide meaningful protection against predatory mortgage lending practices.

Nine Signs of a Predatory Payday Loan

1. Three digit interest rate
While the chances of incurring losses are relatively low, payment charges may balloon to more than 400% APR.

2. Short minimum loan term
75% of payday customers are left with no choice but to “rollover” their loan at an additional cost because of their inability to repay their loan within fourteen days. Longer terms of payment are given for consumers with small loans.

3. Single balloon payment
In contrast with other consumer debts, partial payments are not allowed during the term of the loan. At the duration of the two week term, the entire amount should be repaid in full.

4. Additional Loans (extensions, rollovers or back to back transactions)
Profit is earned by lending companies by giving multiple loans to financially-strapped borrowers. Income generation develops from allowing higher loans to the same borrowers.

5. Simultaneous borrowing from multiple lenders
To repay another debt, borrowers apply for a loan in one-day loan companies. Instead of additional payment, renewal fees are charged.

6. Non-consideration of borrower’s inability to repay
Without regard to their credit history, consumers are asked to borrow the maximum loanable amount. As a result, multiple renewal fees are collected by the lending company because they can’t pay back their loan.

7. Deferred check device
Borrowers are charged multiple late fees for their failure to perform on post-dated checks as well as the fear of being criminally prosecuted for a “bad check”

8. Mandatory arbitration clause
The right of a borrower to sue a lending company is eliminated by payday lenders.

9. No limitation with regards to violation of local state laws by out-of-state banks
State laws were not supported by enacted federal banking laws

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