The lender often fails to provide the borrower with prior notice about the insurance product and then rushes the borrower through the closing. Other times, the lender simply may include the insurance in the loan closing papers with no explanation. In such a case, the borrower may not understand that the insurance is included or exactly what extra costs this product adds to the loan. Lenders engage in this practice by inducing a consumer to refinance a loan, repeatedly, often within a short time frame, charging high points and fees each time. This causes the borrower's debt to increase steadily.
Additional abuses can occur after loan origination in connection with loan servicing.
Lenders may extract monies not owed under the loan terms. They also may fail to provide full or accurate pay-off information, thus tying the borrower to the lender without a means of escape. One avenue that abusive lenders use to target consumers involves home improvement contractors. These contractors may obtain the borrower's consent for a loan with high rates and fees through the use of deception or coercion. In some cases, the contractor then performs lowquality work or no work at all.