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What is predatory lending and what legal protections do I have?


Some Illinois consumers are growing increasingly wary of the terms and conditions associated with taking on debt, and with good reason. Predatory lending that subjects the borrower to abusive or unfair terms of repayment has become all too common. There are federal and state statutes, though, that are designed to protect consumers.

The exact activities that may constitute predatory lending practices are the subject of some debate, but deception and discrimination are often cited. Deceptive practices may include false or inadequate disclosures that misrepresent the cost of the loan or lenders making changes to loan terms after the initial offer. Borrowers should be particularly wary of blank spaces in loan documents, and all of the terms and conditions should be clearly stated before the loan agreement is signed. Risk-based pricing is not necessarily predatory lending, but lenders that charge exorbitant rates to high-risk borrowers may be abusing their position.

Other potentially predatory practices include packaging loans with other services, such as credit insurance, that the borrower does not need, flipping the borrower into a bigger loan with a higher interest rate, encouraging the acceptance of a negative amortization loan or requiring the borrower to agree to mandatory arbitration as part of the loan agreement. The Equal Credit Opportunity Act is a federal law that prohibits lenders from charging higher fees or interest rates based on religion, sex, national origin, race, age or marital status. The Home Ownership and Equity Protection Act also protects consumers from excessive interest rates and fees.

The laws addressing predatory lending are developing and changing rapidly. Those who believe they have been targeted by predatory lenders may consider consulting an attorney experienced in consumer rights matters. The attorney may be able to help interested individuals understand their rights under relevant consumer protection laws and may be able to suggest strategies to combat creditor harassment.

Source:, " Predatory Lending", Al Krulick, September 06, 2014