What the Heck is 'Predatory' Lending?

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Apparently, Monroe County, New York, the county in which I reside, has "Upstate’s highest foreclosure rate." At least a piece of campaign mail I received a while back says so. That piece of election propaganda also said, "Predatory lenders brought us to foreclosure… and now we’re bailing them out?" Given all the press that "predatory lending" has gotten recently, in light of the fact that legislation – specifically laws like the Community Reinvestment Act – resulted in many of the supposedly sub-prime mortgages and given that the percentage of people receiving these loans who were black, the issue interests me. The pejorative term "predatory lending" and how such scary descriptions are used to justify statist protection of black folk also sparked my interest.

According to the more-than-occasionally-correct Wikipedia:

Predatory lending is a pejorative term used to describe practices of some lenders. There are no legal definitions in the United States for predatory lending, though there are laws against many of the specific practices commonly identified as predatory, and various federal agencies use the term as a catch-all term for many specific illegal activities in the loan industry.

One less contentious definition of the term is "the practice of a lender deceptively convincing borrowers to agree to unfair and abusive loan terms, or systematically violating those terms in ways that make it difficult for the borrower to defend against." Other types of lending sometimes also referred to as predatory include payday loans, credit cards or other forms of consumer debt, and overdraft loans, when the interest rates are considered unreasonably high. Although predatory lenders are most likely to target the less educated, racial minorities and the elderly, victims of predatory lending are represented across all demographics.

I have no real dispute with much of this. What troubles me, however, is the presumption that the State must protect certain people from taking out a loan that they themselves are seeking in the first place! I rather think predatory lending is when the taxpayer lends the government money to finance the clean-up of a malady that government policy caused. (Actually, in that case lending is a bogus description. That scenario sounds more like theft.) But maybe I’m getting ahead of myself.

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Wilt Alston [send him mail] lives in Rochester, NY, with his wife and three children. When he's not training for a marathon or furthering his part-time study of libertarian philosophy, he works as a principal research scientist in transportation safety, focusing primarily on the safety of subway and freight train control systems.

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