The government announced settlements Thursday with seven companies accused of violating federal restrictions against exploiting people who take out high-rate loans. Others are being investigated. He stressed there are legitimate lenders of high-rate loans. Consumers are entitled to a three-day cancellation period. But the commission has found many lenders skirting the rules.
Regulators say their actions left consumers with huge debts.
Calif. Legal advocates say certain groups are particularly susceptible. Low-income residents who don't have a traditional bank in their neighborhood or elderly homeowners who might not think they can get a loan except through a broker are more likely to become prey, says Benjamin Diehl, an attorney with Bet Tzedek Legal Services in Los Angeles. Those are defined as loans in which more than 8 percent of the total loan amount is in fees or in which the annual percentage rate exceeds by more than 10 percentage points Treasury notes of comparable maturity. Pitofsky says in some cases, consumers are seeking high-cost loans when they could really be obtaining conventional loans. Stella Adams, executive director of the North Carolina Fair Housing Center, said she also has seen instances in which brokers, who might be promised kickbacks by lenders, put consumers in loans with higher interest rates than their credit record warrants.