Predatory Lending

DEFINITION of 'Predatory Lending'

Unscrupulous actions carried out by a lender to entice, induce and/or assist a borrower in taking a mortgage that carries high fees, a high interest rate, strips the borrower of equity, or places the borrower in a lower credit rated loan to the benefit of the lender. As with most things of a dishonest nature, new and different predatory lending schemes frequently arise.

BREAKING DOWN 'Predatory Lending'

Many states have anti predatory lending laws. A dedicated consumer who shops around for a mortgage is unlikely to be taken by predatory lending. Additionally, becoming more financially literate helps borrowers spot red flags and avoid questionable lenders. The U.S. Department of Housing and Urban Development (HUD) has also been taking measures to combat predatory lending.