One would think the 2008 financial crisis and resulting recession would have caused financial institutions and other creditors to rein in risky and illegal lending practices. Indeed, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, which created the Consumer Financial Protection Bureau (CFPB) to ensure such practices were prevented. The CFPB is tasked with overseeing consumer protection in many financial sectors including banks, credit unions, payday lenders, mortgage-servicing operations, foreclosure relief services, debt collectors and, most recently, for-profit colleges. The CFPB’s presence overseeing new consumer protection laws has spawned litigation against various entities engaged in any illegal practices.
Now, state attorneys general are filing lawsuits on behalf of municipalities alleging that financial institutions preyed on minority consumers by offering mortgages or refinancing of mortgages under more costly terms as compared to other consumers. Los Angeles, Miami, and Cook County, Ill. sought damages from banks for lost property-tax revenue and increased municipal services stemming from foreclosures they said resulted from discriminatory lending in violation of the Fair Housing Act. The banks allegedly knew the loans were likely to fail and issued them anyway knowing they would still generate revenue from their questionable lending practices.
Earlier this summer, an Alabama judge dismissed a lawsuit filed by payday lenders who sought to challenge the state’s creation of a central database to track high-interest loans obtained by borrowers. The database was created to ensure that consumers don’t obtain multiple loans exceeding the $500 cap, which often results in total interest payments far exceeding the principal loan amount. This ruling was a step in the right direction against loan scams and preventing exorbitant interest rates from unfairly saddling consumers.
Our firm is actively investigating potential cases involving predatory lending or other actions where abusive financial practices take advantage of consumers. If you would like more information, please contact Rhon Jones or Lance Gould, lawyers in our firm, at 800-898-2034 or by email at Rhon.Jones@beasleyallen.com or Lance.Gould@beasleyallen.com.
Sources: Bloomberg, Chicago Tribune, WSFA 12 News
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