Cons and hustles are as old as civilization itself. For as long as there have been goods and currency to collect and divide, there have been unscrupulous individuals who are ready to relieve the unwary consumer of their holdings. Banking today is no different, but it doesn't mean consumers should operate with paranoia. A healthy dose of skepticism and a pocketful of questions can mean the difference between the perfect loan and the perfect scam.
Who Are They?
The term "predatory lending" doesn't really have a specific legal definition, says Jim Fuchs, director of communications for the New York State Banking Department, but the practice is well known and is the subject of many consumer hotlines and advocacy groups.
Part of the trouble defining it specifically lies in the nature of the banking industry itself, says Fuchs. "In general we see that financial education programs tend to lag behind the innovation in the industry, which in many ways is our financial system. New products are designed to meet the constantly changing financial landscape."
The practice is somewhat subtler than might be expected, and may come from an unexpected source," continues Fuchs. "Generally, people who are engaged in predatory practices run the gamut from people within their own community to those who look for opportunities within each loan conference."
Lenders who are not as heavily policed are more likely to offend, so if you're shopping for a loan, it's a good idea to look for lender credentials such as FDIC backing, says Susan Besaw, a spokeswoman for the American Banking Association in Washington, DC.