PREDATORY LENDING

WHAT IS PREDATORY LENDING?

There is no legal definition for predatory lending However it is generally understood as loan with unfair or abusive terms including High interest rates High late fees Short loan terms

WHY SHOULD IT BE ADDRESSED?

Predatory lenders knowingly take advantage of those in the subprime market who are unable to pay. Subprime loan originations increased from $35 billion in 1994 to $160 billion in 1999. (HUD.gov) These loans target specific populations particularly the elderly, women, and minorities It has become so much of a problem that it became illegal for payday loan businesses to lend to military personnel in 2006 However the general population isnt quite as protected

QUICK FACTS
In South Carolina a $500 loan from Advance America costs $75.40 in fees, or what amounts to a 393 percent APR. (The Nation) After North Carolina passed a 36 percent interest rate cap in 2003, Advance America went right on lending at triple -digit rates. (The Nation) In Baltimore, foreclosure petitions filed for homes increased from 1 ,900 in 1995 to over 5,000 in 1999 (HUD.gov) Predatory lending is legal in 37 states Payday loan centers are more prevalent in inner city areas than anywhere else

WHILE MOST CAN PAY LOANS BACK

There are many cases where individuals arent able to do so and the loan flips. This puts the borrower in a position where there debt continues to grow and their income remains the same The borrower will often have to result to obtaining another loan in order pay a previous one. This is very profitable for lenders, but appears to be out right abusive to the borrower. Though one can argue that the borrower knowingly entered the contract, it does not seem to justify this abusive practice

WHAT CAN BE DONE

Better financial education More access to prime lending businesses Of fer other options to build credit Further restrictions in subprime lending