Section 6.4 The Big Problem: Predatory Lending
What counts as predatory lending? What kinds of laws can help protect consumers? What are resources that can be provided to help people avoid predatory lending?
In order to help people avoid predatory lending, we first need to figure out what predatory lending is. We'll look at how we can compare different loans using interest rates - even if they're not clearly spelled out information we're given.
We'll talk about how high interest rates can be disguised as fees or rolled into payments. We'll discuss the different possible ways that companies can mislead consumers about the cost of their products.
We'll look at the concept of risk and expected value. Predatory lending is based on the idea that higher risk borrowers - those less likely to be able to repay the loan - must pay higher interest rates. But how high is too high?
We'll look at reverse redlining - where are payday lenders located? Do the patterns that were seen in California reappear in other places? How can we look at data and see where payday lenders are more likely to be?
Finally, we'll discuss what can be done to help people avoid predatory lending. Are there laws which can be passed? Can community organizations help people find non-predatory lenders? How can we help people access credit from non-predatory sources?