In the past few days, the fed have proposed a few laws against what they called “predatory” practices exercised by subprime lenders. Predatory practices include:
1) giving bad teaser rates that may change dramatically,
2) not fully disclosing all the risks involved with a loan,
3) not presenting all the options available to a borrower.
I thought about this and it reminds me of the unethical deals I got offered when I went to buy my car.
1) they tried to sign me up for bad interest rates by showing me low monthly payments with a long loan-period,
2) they don’t mention that I will actually be paying A LOT more in interest if I accept these low payments,
3) they never allowed me to work with them on finding a good interest rate and down payment.
As you can see, these practices are almost identical. Although I did not fall for any of these cheap tricks, I still felt like I didn’t get a very good interest rate because they were unwilling to work with me to find an appropriate monthly and down payment. I am pretty sure that many people have walked into a car dealership and have been tricked into accepting horrible rates because of these unethical practices.
With the recent subprime fall out, I think it is time that the government give a closer to ALL forms of “predatory” lending institutions.