In these dire economic times, many African American families are just barely making it and often live from paycheck to paycheck. Consequently, this makes many of us vulnerable to companies or con artists who seek to profit from providing loans to the elderly, the sick and the poor during these troubling periods.
These practices are considered predatory and have opened a lucrative market often described as predatory lending. These practices can leave individuals homeless and with their credit ruined.
Predatory lending refers to unscrupulous actions carried out by a lender to entice or assist a borrower in acquiring a loan that carries high fees, high interest rates and may result in the owner losing all of the equity in their property. These loans always benefit the lender, not the consumer. There are several types of predatory lending businesses that people living in economically depressed and primarily African American neighborhoods should be on the look out for.
Predatory Payday Lending: Payday lending can carry up to 400 percent annual interest rates, and places borrowers into a debt trap that can go on for weeks, months or years. Some payday lenders secure loans by holding the borrower’s signed personal check for the amount of the loan plus the fee, or by accessing the borrower’s bank account electronically. If the borrower does not pay off the loan on the due date, the lender can deposit the borrower’s check, causing bounced check fees that can lead to the borrower’s bank account being closed.
Predatory Automobile Finance Loans: A buyer qualifies for a lower interest rate or “buy rate” under which the lender is willing to fund the loan. However, the buyer must agree to allow the dealer to increase the “buy rate” at the dealer’s discretion. The result is that the dealer increases the interest rate, and most of the extra interest is “kicked back” to the dealer. This is the tactic used by many Buy Here Pay Here used car dealers. These dealerships typically finance used auto loans in-house to borrowers with no or poor credit histories. Saddling the purchaser with a high APR increases the likelihood of a loan default and repossession of their vehicle. Their business model depends on churning the same vehicles to local buyers as many times as possible. Dealers usually require a disproportionate percentage of the car’s actual value for a down payment and pack the loan with unnecessary fees to make more money up front.
Predatory Tax Refund loans: Many who are anticipating a tax refund, may be tempted to use an “instant refund” or refund anticipation loan (RAL). Before you or do, please be wary of signs that may reflect a shady operation. First are high interest rates. The annual interest rate of a predatory tax refund loan can be as high as 500 percent. Moreover, In addition to a high APR, bad tax refund loans are often loaded with unnecessary “administrative” fees. So be concerned if a tax preparer guarantees a large refund, particularly if such promises come with more fees. –torrance stephens, ph.d.
If you believe you have been a victim of predatory lending practices there are federal agencies that can help. Please contact the organization or agency in your community, such as the Better Business Bureau or state insurance commissioner to help you address your specific problem.
