BUFFALO, N.Y. (WKBW) — Loan sharks are targeting consumers and businesses desperate for cash. We spoke with experts about what to look out for so you don't fall victim to predatory lending, and what you should be doing if you do need a loan.
Brendan Little, a partner at Lippes Mathias said the biggest red flag about predatory lending is that they found you, typically through email.
AJ Baynes, the President of the Amherst Chamber of Commerce, recommends people turn to their local bank for a loan first. If a business still needs a loan from a non-traditional lender, he said the Chamber of Commerce can help owners read the fine print.
"We have other businesses that would help other chamber members read the fine print and see if that is good for you and for your business," he said.
Noelle Carter, the President & CEO of Consumer Credit Counseling Service of Buffalo, said you should never pay a lender more than 30% interest. Even a low interest rate, however, can still have predatory warning signs in the fine print.
She said look at the terms of the loan and ask questions like:
- Is there a balloon payment at the end?
- Will they charge me if I repay early?
- What is the actual APR?
She said to also research your lender.
"Just a good old Google search of what the lender is, and what people are saying about them, while you can't take it at 100% truth you can kind of get a feeling if other people have had major problems with them.
Senator Chuck Schumer is calling on the federal government to take action. He said he's seen predatory lenders charging 800% interest. Little said agencies Schumer called on, like the FTC, can do more to tighten regulations and investigate complaints. He said, however, that the process is tougher when it comes to helping businesses.
"The law presumes that businesses have a certain set of knowledge and expertise, verus the consumer who may be more easily taken advantage of."
All three experts had the same advice; if it sounds too good to be true, it probably is.