Tell us
what you think
Our Sponsors
 |
Our Sponsors
|
Predatory v. Subprime
The terms "predatory lending" and "subprime lending" are sometimes used interchangeably. But they aren't the same thing - not at all.
Subprime lending is so called because the borrowers are not qualified for prime credit. They represent higher risk and generally can obtain loans only on more stringent terms - including higher rates- than prime borrowers. Sub-prime simply means that the borrower is less qualified and the loan is therefore riskier.
Predatory lending is something else altogether. Predatory lenders take advantage of borrowers - usually less-sophisticated borrowers - in any way they can. Predatory lenders are after the money, not a long-term customer relationship.
What tends to confuse the issue is that subprime borrowers make easy targets for predatory lenders. The less qualified and the less knowledgeable the borrower is, the easier it is for the predatory lender to take advantage of them.
When banks develop and market loan programs to reach more low-income borrowers, or a greater share of the minority market, many of the programs would be considered sub-prime products. They are designed for consumers with limited credit experience and some borrowing problems.
Predatory lenders take advantage of the very borrowers that banks work with through special loan programs. Protect the interests of the bank - and their newest customers - by educating these customers on the tricks of the predatory lender.
Copyright © 2000 Compliance Action. Originally appeared in Compliance Action, Vol. 5, No. 4, 5/00
Rate This Article
Current Rating For the Feature:
| Total Ratings for this Feature: 3 |
|