While there are no internationally agreed legal definitions for predatory lending, a 2006 audit report from the office of inspector general of the US Federal Deposit Insurance Corporation (FDIC) broadly defines predatory lending as "imposing unfair and abusive loan terms on borrowers", though "unfair" and "abusive" were not specifically defined.
[8] Where such philanthropic lending initiatives (microfinance) are widely available, loan sharks and other predatory lenders should not continue to thrive.
[13] Organizations and agencies including ACORN,[14] HUD,[15] the American Civil Liberties Union,[16] United for a Fair Economy[17] and more prove that predatory loans are disproportionately made in poor and minority neighborhoods.
[22] African Americans and other minorities are being disproportionately led to sub-prime mortgages with higher interest rates than their white counterparts.
[22] In addition, studies by leading consumer groups have concluded that women have become a key component to the subprime mortgage crunch.
Media investigations have disclosed that mortgage lenders used bait-and-switch salesmanship and fraud to take advantage of borrowers during the home-loan boom.
In February 2005, for example, reporters Michael Hudson and Scott Reckard broke a story in the Los Angeles Times about "boiler room" sales tactics at Ameriquest Mortgage, the nation's largest subprime lender.
In an article in the January 17, 2008, New York Times, George Mason University economics professor Tyler Cowen described "predatory borrowing" as potentially a larger problem than predatory lending:[33]As much as 70 percent of recent early payment defaults had fraudulent misrepresentations on their original loan applications, according to one recent study.
The research was done by BasePoint Analytics, which helps banks and lenders identify fraudulent transactions; the study looked at more than three million loans from 1997 to 2006, with a majority from 2005 to 2006.
In 2012, for example, New York Attorney General Eric Schneiderman reached a $7.8 million (~$10.2 million in 2023) settlement of allegations that a leading appraisal management firm had helped inflate real estate appraisals on a wide scale basis in order to help a major lender push through more loan deals.
[35] Several commentators have dismissed the notion of "predatory borrowing", accusing those making this argument as being apologists for the lack of lending standards and other excesses during the credit bubble.
[37] In many countries, legislation aims to control this, but research has found ambiguous results, including finding that high-cost mortgage applications can possibly rise after adoption of laws against predatory lending.
Although not specifically anti-predatory in nature, the Federal Truth in Lending Act requires certain disclosures of APR and loan terms.
Other states with predatory lending laws include: California, Colorado, Connecticut, Florida, Kentucky, Maine, Maryland, Nevada, Ohio, Oklahoma, Oregon, Pennsylvania, Texas, Utah, Wisconsin, and West Virginia.