Industry News

FDIC issues policy letter on predatory lending

Banks warned to follow legal requirements

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Federal bank regulators sent out a letter this week describing lending practices they consider to be predatory, warning that they expect lenders to "treat consumers fairly, adhere to all applicable legal requirements, and underwrite loan products appropriately." The Federal Deposit Insurance Corp.'s Jan. 22 "Supervisory Policy on Predatory Lending" describes characteristics of predatory lending, and reaffirms that such practices "are inconsistent with safe and sound lending and undermine individual, family and community economic well-being." According to the policy letter, predatory loans include at least one, and "perhaps all three," of the following characteristics: Making unaffordable loans based on the assets of the borrower rather than on the borrower's ability to repay an obligation; Inducing a borrower to refinance a loan repeatedly in order to charge high points and fees each time the loan is refinanced ("loan flipping"); or Engaging in fraud or deception to conceal the...