KASL WESTON COUNTY EXTENSION REPORT BILL TAYLOR 4/3/12 PREDATORY LENDING

What comes to mind when thinking of the term Predatory Lending? Payday Lending and Car Title Loans come to mind, but it is much more. Nolo Law for All (www.nolo.com ) defines predatory lending as:

Any type of unscrupulous lending practice where a lender takes advantage of a borrower. It usually involves borrowers taking on high-cost loans they cannot afford to pay over time because the loans were based on the borrowers' assets and not on their ability to repay the debt. Low-income, elderly, or otherwise vulnerable people are often the target of this type of lending. While there are laws against certain specific types of predatory lending practices, the term is often used as a catch all for any fraudulent, abusive, discriminatory, or deceptive lending practice. (http://www.nolo.com/dictionary/ predatory-lending-term.html)

The Center for Responsible Lending (www.responsiblelending.org ) has eight informative publications on signs of predatory lending that include: Predatory Mortgage Lending, Predatory Overdraft Fees, Predatory Car Loans, Predatory Payday Loans, Predatory Tax Refund Loans, Signs of Credit Card Abuses, Predatory Car Title Loans and Consumer Resources.

The Predatory Overdraft publication explains that overdraft protection can be predatory and is explained in another publication and video on their website called, Is Your Bank Cooking the Books? Overdrafts occur when a person spends more than they have in their checking account. Overdraft protection, as it is called, is a high-interest loan with large fees. Overdraft fees cost Americans $23.7 billion each year from checking account holders through high fees and unfair practices.

Working people struggling to make ends meet are affected the most. Some banks and credit unions can manipulate checking account transactions to boost overdraft fees by reordering transactions from high to low. For example: John has $80 in his checking account and uses his debit card and makes a $5 purchase at the coffee shop, a $8 purchase for lunch, a $15 purchase for groceries, and a $100 purchase for clothing. In this example, the $100 purchase would trigger a $34 (national average) overdraft fee, but there are some banks and credit unions which reorder transactions, and in the same example, they would run the $100 purchase through first, followed by the others from high to low triggering four overdraft fees of $34 dollars equaling $136! This is legal and some of the largest banks and credit unions in the country do this.

Recently the Federal Reserve issued a new rule to require banks and credit unions to obtain permission before enrolling customers in automatic approval of debit card and ATM transactions. Unfortunately, many banks and credit unions are using misleading marketing to

persuade customers to opt in to this high cost program. As the customer, we have the right to call your bank or credit union to opt out of overdraft protection, which would stop them from charging overdraft fees on debit card transactions and ATM withdrawals. Instead, they will decline transactions that would overdraw your account, at no cost to you. However, they are not required to opt you out of overdraft for checks and online bill payments, you need to ask them to do so.

It is also important to ask if your bank or credit union reorders transactions from high-to-low. If you are not satisfied with your bank or credit unions response, you could consider moving your checking account to a new financial institution.

Go to the Center For Responsible Lending web-site and read the publications they offer. This will allow you to learn more about Predatory Lending and how you can protect yourself and help others.

Taken from an article by Lyle Hanson in University of Idaho Extensions Idahos Two ent tips newsletter.

Bill Taylor Weston County Extension Office The University of Wyoming is an equal opportunity/affirmative action institution.