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.