Federal law doesn't explicitly give a definition of "predatory lending," and state laws describe predatory lending in different ways. Generally, predatory lending is a term typically used to describe unconscionable lending practices where a borrower is provided with an unfair loan. The Office of the Comptroller of the Currency (OCC), which regulates and supervises all national banks and federal savings associations, has described predatory lending as the disregard of basic principles of loan underwriting.
If a lender used unethical, deceptive, unfair, or fraudulent activity during your loan origination process, it might have engaged in predatory lending.
Courts generally consider a loan to be predatory if the lender:
Predatory lending encompasses several different types of abuses that loan originators might engage in. According to the OCC, the fundamental characteristic of predatory lending is "the aggressive marketing of credit to prospective borrowers who simply cannot afford the credit on the terms being offered." The following are a few situations that could constitute predatory lending:
Federal laws that protect borrowers against predatory lending practices include:
The federal Fair Housing Act (FHA) can also be used to combat predatory lending, and state law often restricts the terms or provisions of certain loans.
Ultimately, there's no bright line that a loan must cross to be considered predatory; an assessment must be made on a case by case basis. In court cases, the court will look at each of the factors making up the loan and decide whether the factors, taken as a whole, constitute predatory lending. If a court determines that a loan was predatory, it could order the lender to modify the terms of the loan or cancel the debt, or take any other equitable action. If your lender used unfair lending practices when you got your mortgage loan, you might be able to fight a foreclosure.
If you think you're a victim of predatory lending, consider talking with a lawyer experienced with anti-predatory lending laws. You can also file a complaint about a predatory lender with the Consumer Financial Protection Bureau or your state Attorney General's office.