Ventura Predatory Lending Attorney
Predatory lending includes a variety of practices utilized by lenders to lock borrowers into unfair, abusive loan contracts with unreasonable interest rates and other unconscionable terms. They include a range of aggressive and misleading sales tactics, sneaking in hidden and unfair loan terms, exploiting borrowers’ ignorance of complex transactions, and often committing blatant acts of fraud or deception.
In general, predatory lending occurs when a borrower uses underhanded tactics to knowingly employ and enforce reasonable loan terms in order to maximize their earning capacity while completely disregarding the borrower’s capacity to actually repay the loan. Often, these practices are targeted at certain borrowers based on their race, ethnicity, age, or gender, which is both discriminatory and illegal.
If you’ve been subjected to predatory lending practices, you have the right to get your money back and hold the predatory lenders accountable for their actions. The California predatory lending and debt relief attorneys at Rounds & Sutter LLP can help you protect your finances and put you back on the path toward financial freedom.
California’s Predatory Lending Law
California law prohibits lender schemes targeted at individuals who lack the capacity to pay. As discussed below, California law sets certain interest rate caps on loans below a certain amount. Additionally, California Financial Code § 4970 et seq. prohibits a variety of activities by lenders issuing covered loans, including:
- Failing to consider the borrower’s ability to repay the loan
- Recommending or encouraging consumers to default on existing loans in order to issue a new loan to refinance the consumer loan
- Making covered loans without providing proper disclosures
- Financing certain types of credit insurance into consumer loans
Additionally, the law establishes a fiduciary relationship between brokers and borrowers. That means that brokers owe a legal duty to the borrower to act in their best interest. Lenders who violate the law can face damages of $15,000 or the actual harm to the consumer as well as punitive damages for flagrant violations.
Predatory Lending is Extremely Common in California
The California Reinvestment Coalition (CRC) has been studying the effects of predatory lending on borrowers in California. Some of their preliminary data is astonishing, including:
- 73% of borrowers saw key loan terms change at the time of closing as compared to the terms offered during initial talks
- 61% of borrowers had loans that included prepayment penalties, locking borrowers into predatory terms by penalizing them for attempting to pay off loans early
- Over 60% of borrowers reported that they had refinanced their homes from two to six times, indicating a practice of “loan flipping” and “equity stripping” by creditors
The California Department of Business Oversight (DBO) released data with some shocking numbers as well. Over half (55 percent) of loans issued between $2,500 and $4,999 in 2018 carried an annual percentage rate (APR) of 100 percent or more. Loans over $2,500 were not subject to a cap on interest rates. The DBO found that many payday lenders, including Check Into Cash, Advance America, and Quick Cash Funding were intentionally driving borrows into loans of $2,501 (instead of slightly lower) specifically to evade interest rate caps for lower value loans. In fact, 70 percent of fees collected by payday lenders that year came from borrowers with seven or more loans in that one year, representing an astonishing $297.3 million in debt. Lenders target low-income individuals and families to extort them with exorbitant fees knowing that they lack the resources to object.
In 2019, California Governor Gavin Newsom signed into law a bill that caps interest rates at 36 percent for loans under $10,000. The aim was to curb the decades-long practice of predatory lenders charging borrowers of loans between $2,500 and $10,000 exorbitant rates, sometimes exceeding 200 percent. The law is certainly one step toward protecting borrowers from predation, but it’s far from enough to stop all forms of predatory lending.
Protect Your Home, Your Finances, and Your Family from Predatory Lending
Lenders have to abide by certain rules. They cannot simply lie and mislead to take advantage of the fact that they are experts in issuing loans while borrowers are often inexperienced in complex transactions. Abusive loan terms, discriminatory marketing, sneaking in terms at the last minute that were never mentioned during negotiations, and other predatory practices are all illegal and unconscionable.
If you have been the target of predatory lending practices, you have the right to fight back. The predatory lending law attorneys at Rounds & Sutter are ready to help. Call our Ventura debt relief law offices today for a free consultation.