Predatory lending and your rights.

What Counts as Predatory Lending?

Predatory lending is a pattern of practices that benefit the lender at the borrower's expense, often through deception, hidden costs, or terms designed to trap the borrower in a cycle of debt. It is most visible in mortgage lending, auto financing, payday and title loans, and certain personal-loan products.

Common Predatory Practices

Bait-and-Switch Terms

Quoted rates and fees that change at closing, undisclosed adjustable-rate features, or "teaser" rates that spike after a short introductory period.

Undisclosed or Padded Fees

Origination charges, broker compensation, document fees, and third-party costs that are not properly disclosed on the Loan Estimate and Closing Disclosure required by TILA and RESPA.

Equity Stripping

Loans structured to extract a homeowner's equity through repeated refinancing, large prepayment penalties, or balloon payments the borrower cannot reasonably afford.

Loan Flipping

Repeated refinancing that generates fees for the lender or broker without providing a net tangible benefit to the borrower.

Steering and Discrimination

Pushing borrowers toward higher-cost products they don't qualify for, or treating applicants differently on the basis of a protected characteristic — both of which can violate the Equal Credit Opportunity Act (ECOA) and Fair Housing Act.

Servicing Abuses

Misapplied payments, force-placed insurance, improper escrow handling, unjustified foreclosure proceedings, and failure to honor loss-mitigation options required by federal regulation.

Federal Protections

• Truth in Lending Act (TILA): accurate disclosure of APR, finance charges, and total cost.
• Real Estate Settlement Procedures Act (RESPA): closing disclosures, servicing transfer rules, escrow rules, and prohibitions on kickbacks.
• Equal Credit Opportunity Act (ECOA): prohibits discrimination in any credit transaction.
• Home Ownership and Equity Protection Act (HOEPA): additional protections for high-cost mortgages.
• Dodd-Frank Act: "ability-to-repay" rules, qualified mortgage standards, CFPB oversight.
• Fair Credit Reporting Act: accurate reporting of loan status to bureaus.
• State Usury and UDAP Laws: caps on interest and prohibitions on unfair or deceptive acts.

Red Flags Before You Sign

• Pressure to sign quickly or skip reading the documents.
• Quoted terms that don't match the written documents.
• Blank fields in the loan documents at closing.
• Prepayment penalties or balloon payments you don't fully understand.
• A monthly payment that exceeds what you can reasonably afford.
• "No income verification" or "no documentation" sales pitches.

Defenses and Remedies

Depending on the violation, remedies can include rescission of certain loans, statutory and actual damages, recoupment against the lender in a foreclosure action, restitution, and attorney's fees. In many cases, servicing violations can pause or unwind a foreclosure entirely.