Predatory Lending

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.”

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.