Predatory Lending | Managing Your Debt | Elder Rights Handbook

Savvy, crooked lenders are ready to pounce on the unsuspecting borrower. These lenders may try to sell you a loan with inflated interest rates and fees.  This is called “predatory lending.”

Some signs of predatory lending

• Excessive fees;
• Very high prepayment penalties;
• A kickback to the broker who sells you the loan;
• New loans which generate fees that get you further in debt;
• Unnecessary products and add-ons;
• Mandatory arbitration clause in the contract;
• Not getting the best loan terms despite having a good credit score; and
• “Balloon” payments: low monthly payments with a large payment at the end of the loan period.

Examples of common predatory lending

• High cost, small loans, such as:
• Credit cards
• Pay day loans – you write a check to the lender for the amount you borrowed plus a fee
• Auto title loans
• Tax refund anticipation loans
• Rent to own agreements

What you can do if you think you are a victim of predatory lending

You can change your mind at any time before you sign a contract. Also be aware that the Truth in Lending Act allows you to change your mind within three (3) days of signing a contract that uses your home as security. You need to write a letter to your lender telling them that you are exercising your rights under the Truth in Lending Act. Send this request by certified mail to the lender, and keep a copy for your records.

If you think you have become the victim of predatory lending, call the Legal Services for Maine Elders Helpline at 1-800-750-5353 to talk to an attorney for free.

How to avoid becoming a victim of predatory lending

• Know your credit score and check you credit report annually. A good credit rating may qualify you for a better interest rate. Check your credit score for free by clicking here.
• Talk to your local bank to check lending rates.
• Don’t take the first loan you are offered.  Shop around.
• Ask questions.
• If you don’t understand the loan terms, talk to a lawyer, or get someone you trust to look at the documents with you.
• Be suspicious of ads promising “No Credit? No Problem!” If it sounds too good to be true, it probably is.
• Ignore high-pressure sales tactics, and don’t jump into a deal that sounds good without taking the time to check it out first.
• Remember that a low monthly payment isn’t always a “deal.” Look at the total cost of the loan.
• Be wary of promises to refinance the loan to a better rate in the future.
• Never sign a blank document or anything the lender promises to fill in later.
• Be suspicious of a lender who solicits you. Most reputable mortgage companies and lenders don’t “cold-call.”

Resources

Legal Services for Maine Elders
If you think you have become a victim of predatory lending and you are a Maine resident who is 60 or older, call the Legal Services for Maine Elders Helpline at 1-800-750-5353 to talk to an attorney for free.

Annual Credit Reports
To request a free copy of your credit report, visit the Annual Credit Report website by clicking here.

Maine Bureau of Consumer Credit Protection
The Maine Bureau of Consumer Credit Protection enforces Maine credit laws and Maine residents may contact the Bureau’s Consumer Line at 1-800-DEBT LAW (1-800-332-8529) and visit their website here.