Carol Forsloff asked:


Predatory lending is a term that is used a lot in the news these days, so we need to know what it means. Legal definitions are scarce, but it is a common term among newscasters. For the most part predatory lending refers to specific practices where a lender convinces to borrow money using unfair and abusive terms. Usually the rates are much higher than other types of loans. Actually these businesses are similar to Shakespeare’s Shylock in that most of these people have little conscience about what they do, they are simply interested in making money in easy ways at the expense, most often, of very poor people or people who don’t understand the terms.

These days poor African Americans who were victimized are being portrayed as the cause of the nation’s loan debacles. On the other hand, there is a lot of blame to spread around. Lots of people got involved in loans beyond their means because their homes were worth so much on paper that they believed there was no end to that growth so bought the most they could get by leveraging the least amount of money. Loan companies saw this opportunity and made money on the greed of others while filling their own greedy pockets.

Predatory practices aren’t just involved in mortgages, however. They spill over into credit cards, payday loans and overdraft loans where the interest rates are particularly high. This means desperate people get into more desperate situations by getting money at usury rates and becoming deeper and deeper in debt. That’s why the blame needs to be pointed in a number of directions, and not just to the poor. The rich wanted to get richer at the poor’s expense, and the rest of us thought that the real estate trend towards up would never go in the opposite direction. The fact is that although predatory lenders target the elderly and the disadvantaged they victimize individuals across all economic and social groups.

Often predatory lending involves the lender securing the loan with collateral such as a house or car or other tangible good. Then when the person can’t pay, the predator ends up with the goods and then profits by selling the property.

Not long ago someone told me of an African American couple who had bought in a well-to-do suburb with no money down. They were unable to pay the mortgage after a time. This was used as an example of how certain groups take advantage of the system by doing something they couldn’t afford. On the other hand across the country in every income group people lived beyond their means with housing and cars. Look in every neighborhood, or even at yourself, and see just that. Then ask yourself if projecting blame to others is a good idea.

There are organizations that have developed to end the practices of predators in the financial markets. The lending industry helped Americans get into trouble, and the President endorsed this by talking about how housing ownership would be made possible for everyone. Folks saw their neighbors getting bigger and bigger homes and cars, and in that common American way decided to try to keep up. The organization of Americans for Fairness in Lending is about trying to end the practice of predator lending. Rather than simply complaining about the markets and blaming our problems on people who are poor or those who didn’t understand, maybe it’s time to look in our own backyards and join groups that will stop the practice of predatory lending and help people towards better ways of handling money than has been done. It might also be good if we focused less on getting bigger and more expensive, which might have been the great lesson of the market crash. There’s always a lesson to be learned in our heartaches. This lesson is likely to watch out how we get lured into doing things that might cause us problems in the wrong run, like using real estate like a gamblers wheel. The practice of allowing predatory lenders in our communities begins and ends with us.

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