Predatory Lending

Predatory lenders look for people with financial problems who are looking to buy a home, refinance a mortgage, obtain a home equity loan, or save a home from being foreclosed. They blame their outrageous interest and fees on the consumer's shaky credit and take advantage of the consumer's lack of financial knowledge.

Some red flags to look out for:

  • The lender tries to hide high closing costs and fees such as loan origination, underwriting fees, broker fees and transaction/closing costs. The interest rate should not be well above the market average.
  • Monthly payments are small but a large sum is scheduled at the end. This is a common way for lenders to ensure the consumer will have to apply for another high interest loan.
  • The lender pressures the consumer to take out a loan for more than the property value. This sort of loan puts both the consumer and his/her financial record at great risk.
  • There is a large penalty for paying off loans early. This pre-payment penalty makes it difficult for the consumer to refinance to a lower and better interest rate.

Steps you can take to protect yourself:

  • Review every document carefully. Do not feel shy to ask for documents in advance to ensure plenty of reading time. Never sign mortgage documents with blank spaces remaining. Most terms such as interest rate, choice of fixed or variable interest, loan length, pre-payment penalties are negotiable.
  • Shop around and compare loan offers. Remember do not focus just on monthly payments but on all terms such as contract length and how much you're borrowing.


Call the Department of Insurance and Financial Services at 1-877-999-6442 to check if a loan company is a licensed financial lender. If you think you are a victim of predatory lending, call the Attorney General's Consumer Protection Division at 1-877-765-8388 to file a complaint.

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