A primary defense against predatory lending is to become an informed consumer. Read all contracts carefully, paying close attention to interest rates and what can happen if you miss or are late on a payment. Look out for misleading marketing and high-pressure sales techniques too. Though these loans may be advertised as a way out of financial trouble, getting them, often leads to higher and more expensive debt.
It is very important to know your financial limits, especially with mortgages. In addition to losing a lot of money, you risk giving up your home if you fall behind on payments. Remember, only you can decide how much you're going to borrow. Never let someone talk you into taking out more than you can comfortably handle.
Building a positive credit history is also key. You can do this by paying all of your debt obligations on time, reducing balances on credit cards and personal loans, not closing accounts that you have had for a long time, avoiding excess credit applications, and having a mix of credit accounts (such as credit cards, charge cards, and installment loans). Once you’ve proven you can borrow responsibly, you increase your chances of being eligible for loans with low interest rates and excellent terms.
Protection Against Predatory Lending
According to federal law (the Truth in Lending Act), lenders must disclose their loan’s terms in the application or contract. This is typically done in the Truth in Lending Disclosure Statement (For mortgages, the loan terms are also described in the Loan Estimate). Getting out of a contract is usually very difficult, so take your time to read it carefully, making sure you understand and agree to the terms.
If you believe that a lender unlawfully changed the contract, mislead you, added products you didn’t agree to, or persuaded you to accept a loan that that had worse terms than you qualified for, you can contact your state’s attorney general’s office as well as the Federal Trade Commission.
The Fair Housing Act
The Fair Housing Act covers most housing and is very important to know as it is there to protect potential buyers. Lenders should never use your race, color, national origin, religion, sex, familial status, or handicap in your lending decision. The Fair Housing Act has been interpreted to protect the rights of borrowers on maternity, paternity, pregnancy, parental, and/or disability leave at the time of application for a home mortgage loan. You should never be denied for a mortgage loan based on the above-mentioned reasons. It’s also important to keep in mind that it is illegal for anyone to threaten, coerce, intimidate, or interfere with anyone exercising a fair housing right or assisting others who exercise this right. These protections also exist when it comes to advertising. No advertising should contain discriminatory language based on the above protections.
If you feel that you have been discriminated against, you should contact your local HUD Office by calling or writing a letter. Your letter should include your contact information, the person/organization your complaint is against with contact information, the alleged violation(s), and dates the violation(s) occurred.
You can also fill out the Housing Discrimination Complaint Form.
If you are disabled, HUD provides the following resources for filing a complaint:
Should you ever need further assistance in relation to the above, our HUD-certified housing counselors can help you understand your situation further.