Predatory Non-Mortgage Consumer Loans

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Welcome to the online presentation, Predatory Non-Mortgage Consumer Loans. Some of the worst offenders, in terms of predatory lending practices, are non-mortgage consumer loans. Examples are: high cost tax refund anticipation loans, paycheck loans with excessive fees and interest rates, and secured and unsecured loans involving "packing." Packing is a practice where unwanted products, such as credit life insurance, are "packed" into a loan and financed along with the original amount borrowed. Predatory consumer loans are made possible by a lack of understanding by consumers about the cost of borrowing. Many people do not realize that seemingly small fees for short-term borrowing add up to three- and four-digit annual percentage rates (APRs), or loan interest. In addition, lenders often exploit the desire of uneducated, low-income borrowers for immediate cash without fully understanding of the terms of a loan. Some predatory lending involves outright fraud and deception, practices that are clearly illegal. In other cases, predatory loans are technically legal, and convenient for some borrowers, but can become destructive if misunderstood.

Author:
Barbara O'Neill, Ph.D., CFP (Extension Specialist in Financial Resource Management, Rutgers Cooperative Extension)

Duration:
18 minutes, 35 seconds

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