Predatory Lending Fact Sheet
The State of Idaho is working hard to protect borrowers from illegal and improper
lending practices while still making sure that people get the credit they need.
Prospective home buyers and other borrowers need to do their part by being careful
about the lenders they select. Educating yourself about the techniques that dishonest
lenders use will help you avoid becoming a victim of predatory lending.
The term "predatory lending" is used to describe a variety of deceitful, fraudulent
or unfair credit practices, including:
Unscrupulous lenders who use these tactics often target vulnerable populations such
as low-income borrowers and seniors.
- Steering borrowers towards interest rates that far exceed the lender’s risks.
- Charging excessively high fees and commissions.
- Persuading a borrower to repeatedly refinance a loan in order to charge high points
and fees each time the loan is refinanced ("loan flipping").
- Misrepresenting the loan’s terms and conditions.
- Requiring high-cost credit insurance (“packing”).
Protect Yourself From Predatory Lending Practices
- Compare the interest rates and the total costs of loans offered by several banks
and credit unions in your area.
- Ask lenders for names of other customers you can contact to see if they are satisfied
with their experience.
- Check for consumer complaints against lenders you are considering by visiting our
Web site at www.corp.ca.gov or by contacting your local Better Business Bureau.
- Don't take the first loan you are offered.
- Be wary of lenders who contact you first, through mail, e-mail, door-to-door sales
or telemarketing solicitations.
- Be suspicious of lenders or brokers who guarantee loan approval regardless of your
- Beware of offers that are “only good for a short time."
- Steer clear of lenders who resort to high-pressure sales tactics.
- Be wary of promises to refinance the loan to a better rate in the future.
- Watch out for "hidden" terms, such as penalties for early pay-off of the loan.
- Avoid "balloon" payments—some loans keep monthly payments down by requiring a big
payment at the end of the loan term.
- Make sure the monthly payments are well within your monthly budget.
- Ask your lender exactly what is being offered—you have a legal right to know the
total cost of the loan, the annual percentage rate, the monthly payments and how
long you have to pay back the loan.
- Have all fees and points explained to you before applying for a loan.
- Always ask questions until you understand everything.
Before You Sign On The Dotted Line
- Make sure that you have received, read and understand all required disclosure documents.
- Check to see if the loan terms quoted to you match your loan documents.
- Before you sign the loan papers, have a lawyer, family member or friend go over
them with you.
- Never sign a document with blank spaces; all spaces should be filled in before you
- The bottom line: If you have any doubts, don't sign!