When involved in a lending process both lenders and borrowers must act responsibly.
What is Responsible Lending Principles?
Responsible lenders need to know the borrower’s financial background. They run credit checks to find out if he/she is able to pay back the loan on time. Honest lenders give proper loan amounts that don’t burden the borrower and fits into their budget. The federal and state authorities have adopted a series of legal acts and laws that regulate money lending. All legitimate lenders must follow these rules.
List of Responsible Lending Practices
- Lenders must provide borrowers with the information they need to make fully informed decisions about the loan.
- Lenders must price their loans based on appropriate factors, including the risk and cost of extending loan, marketplace conditions, and safety considerations.
- Lenders must only approve applications when they consider the borrower has the ability to repay the loan according to its terms.
- Lenders must provide timely responses to customer questions and complaints and take prompt actions as needed.
What is Predatory Lending?
Predatory lending is the unfair, deceptive, or fraudulent practice that some lenders may carry out during the loan origination process. These particular, unethical lending companies write up loans that have the potential to trap a borrower in a cycle of debt. One of the ways they can do this is by lending too large an amount of money which the borrower will find hard to repay. Also, they set a very high APR on loans. The goal of Direct Loans Lenders is to protect our clients from predatory and deceptive lenders!
Fair Debt Collection Practices Act
We can’t collect debts from our clients because we don’t lend money. But lenders may take this action in certain instances when the borrowers don’t pay off their loans. When doing so, the lenders must follow the Fair Debt Collection Practices Act’s strict guidelines. The Act was put in place to prevent abusive actions that may violate customers’ rights like:
- Using harassing language or methods to collect debts;
- Contacting debtors before 9 a.m. or after 8 p.m.;
- Falsifying information to collect a debt;
- Acting against the Law.
Should any of our lenders act in an illegal way they will be immediately removed from our lender network. Contact us to report any abusive or illegal actions!
Fair Lending Act
The Fair Lending Act ensures that all people should have equal access to credit, despite their age, race, creed, gender, religion or any other non-financial factor. The Act ensures that borrowers are not discriminated against and have free access to loans or other types of credit, as long as they comply with the guidelines for getting such credit. Contact the Equal Opportunity and Fair Lending Office of your local Consumer Financial Protection Bureau, if you feel you are treated with any discrimination.
Truth in Lending Act
The Truth in Lending Act was established to make sure that consumers have all the information about an offer before signing the contract or extending any current credit. Lenders must disclose the information related to the terms and conditions of credit rates, fees, and charges before lending money. Each state has different regulations on short-term and long-term lending. Lenders must adjust their offers in compliance with these laws.
Direct Loan Lenders’ Priorities
Our goal is to educate the clients about short-term and online personal lending. Our team of experts has gathered information on the all aspects within the lending industry. We are publishing this information in an easy to read and clear way. This will allow the borrowers to understand their rights and lending laws better.
Loans Regulation by State
To protect consumers from predatory lenders, some states have issued specific rules and laws. These rules cap loan amounts, fees, interest rates and the number of loan renewals. Check your state limits and regulations on our Rates and Fees page.
References and Sources
1. Legal Status of Payday Loans by State. Retrieved from https://paydayloaninfo.org/state-information
2. Truth in Lending. Retrieved from https://www.occ.treas.gov/topics/consumer-protection/truth-in-lending/index-truth-in-lending.html
3. IV. Fair Lending — Fair Lending Laws and Regulations. Retrieved from https://www.fdic.gov/regulations/compliance/manual/4/iv-1.1.pdf
4. Responsible Lending Principles for Consumer Credit. Retrieved from https://www.wellsfargo.com/help/consumer-credit-lending-principles/
5. Housing Discrimination Under the Fair Housing Act. Retrieved from https://www.hud.gov/program_offices/fair_housing_equal_opp/fair_housing_act_overview
6. Fair Debt Collection Practices Act. Retrieved from https://www.ftc.gov/system/files/documents/plain-language/fair-debt-collection-practices-act.pdf