Predatory Business Practices

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This module described various predatory practices by businesses. Using scholarly resources, describe some specific examples of predatory practices. Should the debtor or borrower bear some responsibility, at least in some instances? Explain why or why not? Predatory business practice is an unethical, predatory approach that a business undertakes to control the market or maximize profit. There are several predatory practices in play today like predatory lending, predatory mortgage servicing, predatory borrowing, predatory pricing etc. For this short paper, predatory lending will be discussed in detail. Predatory lending: predatory lending is “imposing unfair and abusive loan terms on borrowers” (No Author, 2006). The borrowers are induced into agreeing loan terms that are difficult to defend. Predatory lending in home mortgages: The whole process of predatory lending in home mortgages begins with subprime loan, a type of mortgage made to borrowers with poor credit card rating. These borrowers are more like to default on a loan and lenders use this as a reason to charge them higher interest rates based on credit risk rating and in some case the lenders charge excessive interest rate than it is required. Due to their history of default and their poor credit histories, these borrowers qualify only for subprime loans. Predatory lenders sometimes inflate the value of the property in order to qualify the borrowers with poor credit history. The subprime loan, handed out without any regard for the debtor’s ability to repay, usually uses home as collateral. In cases where the monthly mortgage payments exceeded the debtor’s monthly income, foreclosure of the property was inevitable. Another type of abusive tactic that the lenders use is cal... ... middle of paper ... ... Deposit Insurance Corporation (FDIC), Department of Housing and Urban Development (HUD), and Office of Thrift Supervision (OTS) have conducted and funded initiatives to raise consumers’ awareness of predatory lending practices. Government strategies along with consumer awareness are only way to combat predatory lending practices pursued by unscrupulous lenders. References: No Author. Federal Deposit Insurance Corporation, Office of Audits. (2006). Challenges and FDIC efforts related to (06-011). Retrieved from FDIC Public Information Center website: Larson, M. D. (2001, July 26). Lenders drop single-premium credit insurance. Retrieved from Peterson, C. L. (2006, Sep 7). Predatory structured finance. Retrieved from

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