Olympia - Feb. 5, 2001 - In recognition of National Consumer Protection Week (Feb. 5 -10) Washington state Attorney General Christine Gregoire today warned consumers to beware of predatory lending practices that could threaten their credit ratings and, in some extreme cases, force them from their homes.
"These predatory loans come in all forms - from sub prime mortgage loans and payday advances to car title loans. What they have in common are exorbitant fees, outrageous interest rates and up front costs that take money from those who can least afford the terms," Gregoire said.
"These loans are like houses of cards, ready to come crashing down on victims who are left homeless or deeper in debt than they were before," she said.
National Consumer Protection Week is a joint public awareness effort coordinated by the National Association of Attorneys General, the Federal Trade Commission, the American Association of Retired Persons, the Better Business Bureau and other consumer protection groups.
The theme of this year's effort is "$eeing Red? High-Cost Loans Are Danger Zones."
"While these loans can provide consumers with legitimate sources of credit, they are fraught with potential for abuse. Predatory loans are targeted primarily at those who can least afford them - the elderly and low-income minorities - and don't consider a person's ability to repay," Gregoire said.
The hallmarks of predatory lending practices include "loan flipping," in which borrowers are forced to repeatedly refinance their mortgages - generating fees for lenders and
brokers with no real benefit to the borrowers - and loans whose terms are misrepresented and have high fees, high interest rates or "balloon" payments.
A recent report from the U.S. Treasury Department and the Department of Housing and Urban Development warned that predatory residential loans - known as sub prime mortgages, threaten to roll back gains made in neighborhood revitalization and the expansion of homeownership to greater segments of society.
"Federal Reserve Chairman Alan Greenspan has called the practice 'abusive' and Sen. Barbara Mikulski says it's more like 'a virus' that is spreading nationwide," Gregoire said,
"All too often, the people who need fast cash pay dearly in the end."
Consumers who need more information on predatory lending and how to protect themselves can get it from the National Consumer Protection Week Webpage.