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Bradshaw and Bryant PLLC

Michael Bryant

800-770-7008

February 2023


"FAKE LENDER" RULE REPEALED


In July of 2021, President Biden signed a resolution into law that repealed the
Office of the Comptroller of the Currency’s “fake lender” rule. This rule,
created in 2020, allowed predatory lenders to evade state caps on loan interest
rates. This meant that online lenders could put a bank name on their paperwork,
run the loan through the bank but then buy it directly back. These predatory
lenders would claim they were just “servicers” for the bank loan when they were
the actual lenders. By utilizing this loophole, predatory lenders were caught
charging triple-digit interest rates!

Continue reading.





PREDATORY LENDING: WARNING SIGNS AND HOW TO AVOID IT

Predatory loans can trap borrowers in a debt trap that is impossible to escape.

Borrowing money isn’t inherently wrong. Most people borrow large sums of money
when purchasing a house or a car. Some will get loans for school tuition or a
business endeavor. And many lenders out there are happy to work with their
customers to provide reasonably-priced and transparent loans.

There are, however, too many lenders that do not have their customer’s financial
health in mind and instead write loans that benefit the lenders at the
borrower’s expense. These predatory lenders use unfair, fraudulent, or deceptive
tactics to dupe people into loans they can’t afford. Borrowers are then trapped
in a cycle of debt, sometimes having to declare bankruptcy or foreclosure. Some
predatory lenders will actively target people with low income or bad credit.



WARNING SIGNS:

If you’re looking for a loan, heed these red flags:

 * High or adjustable interest rates: An overly-high interest rate should be a
   deterrent, so do the math and see precisely what you will be paying over
   time. If a lender offers an adjustable rate, a low-interest rate at the
   beginning of the loan period may increase significantly as time goes on.
 * Excessive fees: The interest rate may be acceptable, but beware of hidden
   fees. This is most common in mortgage loans, which may come with high closing
   fees, appraisal costs, or title search fees. Some lenders may even charge a
   prepayment penalty if you pay off your loan before the term ends.
 * Loan packing: Lenders know that reading through a loan agreement is a long
   and complicated process. Loan packing takes advantage of confusing language
   and adds unwanted services, fees, and penalties onto a loan agreement.
 * If it sounds too good to be true, it probably is: A lender that forgoes a
   credit check before offering a loan doesn’t know how you will be impacted by
   more debt. Predatory lenders cover that risk by charging high interest rates.
   Payday, title, and pawnbroker lenders, who promise fast cash, frequently
   charge exorbitant interest rates and fees.
 * You can’t build credit: A suitable lender should report your on-time loan
   payments to one or more of the three main credit bureaus (Equifax, Experian,
   and TransUnion). This allows you to improve your credit score, lengthen your
   credit history, and qualify for cheaper financial products in the future.


TIPS TO AVOID BAD LOANS:

 * Do your homework! If you have a relationship with your bank or credit union,
   talk to them first. If possible, compare the rates, fees, and terms of at
   least three lenders.
 * Read everything thoroughly. Spend the time needed to extensively review any
   loan contract. Ask the lender to explain anything that you do not understand.
 * Research the lender. Search for the lender in the Better Business Bureau
   and Consumer Financial Protection Bureau’s databases.
 * Take your time. Don’t let anyone pressure you into agreeing to a loan or
   signing anything. If you’re feeling pressured, it’s time to find a different
   option.



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