Predatory Lending includes the making of unethical or abusive loans that include excessive and often disguised fees, inflated rates, and various practices used in making loans the borrowers cannot repay. Predatory lending has grown significantly over the past ten years. There are many different commercial contexts where predatory lending can occur, such as home improvement, payday lending, tax refund loans, auto title pawn and rent to own. The most common type of predatory loans involves home mortgages. This page focuses on predatory mortgage practices. If a consumer is interested in learning more about other types of abusive loans, more information can be found at the Federal Trade Commission's website.
The recent home ownership boom has been fueled, in part, by lenders opening up their business to people with lower credit scores and less collateral. This type of lending is called "subprime." Subprime loans are aimed at people with lower credit scores, those that need cash, or people with substantial equity in their homes. The subprime market in Tennessee consists mainly of lenders offering services to areas concentrated with lower incomes and less access to traditional banks. Unfortunately, some of these lenders target vulnerable groups with aggressive practices such as unfair and deceptive mailings, door to door sales pitches, or constant telephone calls.
Making credit available on non-predatory terms to all borrowers is a goal of this Office as well as many agencies of Tennessee. It is important that consumers educate themselves to the deceptive practices prevalent in the subprime market.