Matters of finance are difficult enough without the added stress of worrying about whether that deal you thought might be too good to be true is—in fact—too good to be true. With the onset of the recession and the revelations surrounding less than above-board behavior by some financial providers, trust became an issue between consumers and lenders.
The silver lining to the whole situation has been an increased focus on reducing predatory lending and increasing awareness among consumers. Thanks to the efforts of advocacy groups, government agencies and major lending institutions intent on restoring that trust, there are now more options than ever to help people recognize and avoid predatory lending and the repercussions that come with falling prey to unsavory schemes.
The first step in avoiding predatory lending is being able to recognize it. In general terms, predatory lending constitutes “unfair and costly practices that target a particular group or take advantage of a person,” says Ruth Susswein, deputy director of national priorities at Consumer Action, a consumer advocacy group with offices in Los Angeles, San Francisco and Washington, D.C. “It’s exorbitant rates or fees or both.”
Often, entire groups of individuals are targeted, including “older people, immigrants, low-income, minorities and people who have, for whatever reason, more limited access to financial resources,” says Susswein.
That lack of access to trusted financial advice, education or experience is at the core of susceptibility for at-risk individuals. “Sometimes you really don’t know until it’s too late that you’ve been the victim of predatory lending,” Susswein says. “You apply for a mortgage and the lender says this is the best rate you can get.” Maybe it is and maybe it isn’t, she adds, but “you trust the lender, especially if you have no experience in this area. It’s easy to take what’s said at face value, and maybe it’s true and maybe you’re being taken advantage of.”