Explore BrainMass

Predatory Lending: unethical methods in lending

1. What unethical methods and strategies are used by companies for high profit in the areas of consumer credit and some types of insurance?

2. How are individuals persuaded to take jobs with companies which practice taking advantage of others?

Solution Preview

Unethical procedures in consumer and mortgage lending mostly take advantage of uneducated or elderly borrowers by not explaining the products they are offering, but that is only the beginning. Financial transactions are often beyond a large percentage of the population and the products have become so complicated that people can't or won't try to understand.

Following are some samples of what are probably abusive and unfair practices:

1. Charging very high interest rates based on risk of repayment. The credit scores give credence to this practice, but the amount of extra profit may not justify the higher rate of interest.

2. Selling credit insurance for loan payoff in the event of death of the borrower is very expensive insurance. It is often a single premium paid up front or added to the loan balance making it even more attractive. The premiums are usually outrageous as compared ...

Solution Summary

The 500+ word solution is well-cited and explains 11 commonly-practiced unethical or maybe only questionable procedures.