The tricks of the lending trade are limited only by the imagination of the lender. And they’re all conceived with one end in mind — big profits, not helping you.
And, unlike Pinocchio’s ever-growing nose, the consumer doesn’t see any tell tale signs that warn of deception at work when credit’s being peddled.
Here are 10 widely used tricks to get you to make a bad deal for credit.
1. YOUR CREDIT’S BAD.
So you have to take this lousy deal.
A blemished credit record is no reason to accept credit at 25%, 50%, or even several hundred percent annual interest. Or “low-interest” credit scams that tack on big fees for pre-payment, late payment, documents or credit reports.
Even folks with tarnished credit can get loans and credit cards that don’t charge an arm and a leg to borrow. Shop around!
2. YOUR CREDIT’S GOOD.
So we’re offering you all these ‘pre-approved’ credit cards.
Sometimes the same debt pushers who tell you one day that your credit’s no good will stuff your mailbox the next day with “pre-approved” credit cards, home equity loans and other high-cost money.
Debt pushers throw loans and credit cards at unemployed college students, people fresh out of bankruptcy and others who can’t afford them.
So don’t be flattered when someone offers you credit. Credit is the business of making money off your debt – off you. Make sure it’s both necessary and fair before accepting any loan.
3. LOW MONTHLY PAYMENTS!
Paying $100 a month for 24 months costs a lot more than paying $150 a month for 12 months. And minimum monthly payments on credit card bills and such can have you paying interest on a take-out pizza for decades!
So don’t base your borrowing decisions on low-monthly-payments alone. Low monthly payments are great – for the debt pushers. They’re practically pure interest and they can stretch your payments out endlessly.
4. ACTUAL COSTS MAY VARY.
By hundreds or thousands of dollars.
If it looks too good to be true, it probably is.
- 0% interest to start.
- Bounced check “protection.”
- Buy now – pay later!
- Low initial costs and extra “protection” are often just smoke screens.
The question to ask is: “What will this cost me overall?” Because fees and penalties are among the sneakiest credit-pusher games.
Some “low interest” credit cards permanently rocket up to 30 or 40 percent after a single late payment. Or if you spend just $1 over your credit limit. Or if you missed or paid late on another bill from another lender!
Credit-pusher traps are horrific and, worse, they’re often perfectly legal.
5. THESE ARE THE RULES.
For now. We can change them whenever we want.
Standard contract law just doesn’t apply. Loans and credit cards can simply send you a notice with the monthly statement that they’re changing the rate, the due date, the fees and penalties, or the amount of time you have to pay off the loan. Simple as that.
Missing this small single notice locks borrowers into terms they never agreed to.
6. WE NEED THESE PAPERS BACK TODAY.
Sorry. No time to take them to your lawyer.
A rush job is a sure sign of trouble.
If you can’t take a loan contract home or to an attorney, walk away. There’s something there they don’t want you to see.
7. YOU’RE ONE OF US.
We’re just like you. Trust us.
- Seniors to seniors.
- Military to military.
- African-American to African-American.
- Christian to Christian.
Credit pushers are as conniving in their recruitment as they are in their sales. It’s called affinity marketing.
But just because the salesperson looks like you doesn’t mean they have your interests in mind. Affinity marketers are another way to distract borrowers from the price and terms of a bad deal.
8. THE FINE PRINT SAYS IT ALL.
We win. You lose.
The fine print in almost every consumer agreement – from phone and internet to college loans and employment contracts — says that if you get into a dispute with the vendor or lender you have to settle it their way, through binding mandatory arbitration.
But the arbitration game is rigged. The other side often picks who does the arbitrating – and it may cost you lots of money to even get the case heard.
There are so many arbitration clauses out there that it’s hard to avoid them. But if you see one you should take your business elsewhere.
9. GET YOUR CASH NOW!
And don’t pay attention to what it costs.
Fast-cash places like “payday lenders” and automobile “title pawn” shops give fast loans – so fast that the borrower never sees what are often the worst deals that even credit pushers have to offer.
Even a hundred-dollar loan from these vultures can put a person on a treadmill that can ruin a family’s finances for years.
And watch out at income tax time for “Rapid Refunds” or “Refund Anticipation Loans”- that’s just borrowing your own tax-refund money at ridiculously high rates!
10. LIVE LIFE THE WAY YOU WANT.
And spend years paying for it.
Take that vacation! Buy those fancy wheels! If someone’s willing to lend you the money then surely you can afford it, yes?
Well, maybe not… Don’t let those who will profit from your payments talk you into deals by making it look like you’ve got the power.
To tell the truth
This list comes from material put out ten years ago by Americans for Fairness in Lending. Their copyright notice asked that it be shared.
They are no longer around, dissolved, I suspect, when the Dodd Frank bill passed Congress. Our work here is done.
Dodd Frank created the Consumer Financial Protection Bureau, Elizabeth Warren’s idea to create a governmental counter-weight and watch dog on those who sell to consumers.
Just recently the CFPB instituted a rule concerning mandatory arbitration clauses. See Trick 8 above.
The rule prohibits covered businesses selling to consumers from including fine print in their contracts that bar the consumer from joining a class action suits.
Class actions are usually the only way that consumers ripped off in small amounts can effectively get redress for their financial injuries. Which of course, big businesses want to be free to inflict, without worrying about pesky consumer lawyers.
But that’s my cynicism, or is it experience, showing.
CFPB or no, these lender tricks work, and will continue to work to snare the unsuspecting or the desperate.
So, be a smart consumer. Hone your spidey senses for these credit pitches and proceed with caution.
Image courtesy of Tristan Schmurr