![]() Risky loan terms and structures: The practice of making loans with terms or structures that make it more difficult or impossible for borrowers to reduce their indebtedness. Inadequate disclosure: The practice of failing to fully disclose or explain the true costs and risks of loan transactions. Some examples follow:Ĭollateral or equity “stripping”: The practice of making loans that rely on the liquidation value of the borrower’s home or other collateral rather than the borrower’s ability to repay. This policy violates the ECOA’s prohibition on discrimination based on age.įair lending laws also contain provisions to address predatory lending practices. For example, if lender offers a credit card with a limit of $750 for applicants age 21 through 30 and $1,500 for applicants over age 30. Illegal disparate treatment occurs when a lender bases its lending decision on one or more of the prohibited discriminatory factors covered by the fair lending laws. That uneven effect of the policy is called disparate impact. This policy might exclude a high number of applicants who have lower income levels or lower home values than the rest of the applicant pool. For example, a lender may have a policy of not making single family home loans for less than $60,000. ![]() *Age is a prohibited factor provided the applicant has the capacity to enter into a contract.Įven when applied equally to all its credit applicants, a lender’s policy may have a negative effect on certain applicants. The ECOA prohibits discrimination in credit transactions based on Applicant’s exercise, in good faith, of any right under the Consumer Credit Protection Act. ![]()
0 Comments
Leave a Reply. |