Bureau of Commercial Banking
Have you received ads for home repairs—the ones that claim you can obtain a loan to pay for new windows, bathroom renovations, or to refinish your basement, for just a few small, monthly payments? What those ads don’t tell you is that agreeing to one of these loans can put you at risk of losing your home.
Deceptive, or predatory, lenders use slick sales pitches to mislead homeowners into borrowing more than they can repay. Their loans are based on the equity in your home— not on whether you can afford the monthly payments. Once the loan’s hidden fees, excessive points, and high interest rates are added the actual loan cost balloons so much that a homeowner falls behind on payments and is at risk of losing their home to foreclosure.
WHAT YOU STAND TO LOSE
This scenario resonates with far too many New Yorkers who have fallen victim to unscrupulous predatory lenders. But abusive loan practices aren’t limited to home-improvement scams.
Some lenders offer to transfer high-interest credit card debt to another card with a significantly lower rate—but that rate is effective for just a few months. Within a short time, the rate rises to match or surpass what was paid for the original credit card. Undisclosed transfer fees and other service charges ultimately can cost thousands of dollars more.
HOW THEY TRY TO HOOK YOU
Con artists use slick tactics to get people to lower their guard and sign on the dotted line. One company even issued a manual to teach its salespeople how to lure potential borrowers. It suggested establishing a common interest with customers and making them laugh, and instructed salespeople to evade questions about actual loan costs.
The pitches purposely fail to mention what’s hidden in the contract’s fine print, which can include obligating a homeowner to pay added charges for service, document fees or rising interest. What someone thought was a two-year, $2,500 loan can turn into a $40,000 debt, with escalating interest.
When you contact the lender about payment notices that seem too high, you’ll be assured that “it all adds up in the end” or the loan will be “adjusted after a few months.” There are variations on these evasion tactics, but the purpose is the same: Prolong the deceit while interest piles up.
WHO’S AT RISK
Elderly homeowners can be easy targets for con artists. Since many seniors have fixed or limited incomes, the loan’s harsh terms and hidden costs force them to fall behind on payments and the banks take their homes.
Predatory firms also pitch to people in low-income or minority neighborhoods whose homes need repair. They also target cash-poor, but equity-rich, homeowners, and people with high consumer or credit card debt, promising fast cash to meet their immediate needs.
HOW TO PROTECT YOURSELF
If an unknown salesperson contacts you about refinancing your mortgage, taking out a loan against your home equity to pay for repairs, or transferring your credit card debt, it’s important to remember that reputable financial firms go out of their way to help customers understand their financial obligations. Be very suspicious of a firm that fails to offer a full explanation of the details of a loan or credit transaction.
Before you commit to any deal, keep the following in mind:
- Never agree to anything over the phone.
- Never sign loan documents under pressure.
- Take the time to carefully review the entire contract, or have a trusted and knowledgeable family member, friend or an attorney do it for you.
- Never rely on a salesperson’s assurances. Ask for everything to be put in writing for your review. If the salesperson refuses, you’re probably being conned.
REMEMBER , if the deal sounds too good to be true,
IT PROBABLY IS.
HELP IS AVAILABLE
If you or someone you know needs help, contact:
The Community Action Center
Office of New York City Comptroller
1 Centre Street , Room 835
New York , NY 10007
Phone: (212) 669-3916
24-hour hotline: (212) 669-4600
TTY (hearing impaired): (212) 669-3450
Toll-free (outside NY): (800) 800-6385
Fax: (212) 669-2707
New York City Department for the Aging
Information and referral line: (212) 442-1000
TTY (hearing impaired): (212) 442-3078
New York City information and services