It was noticed that the amount of short-term loans that New York banks had landed to their consumers has significantly increased during the last several months.
These high interest loans have to be secured by consumers’ real estate that is why local authorities started an investigation in order to find out whether such financial product breaks the law.
NY regulations prohibit predatory lending and financial institutions which commit such activity are strictly punished.
On Tuesday nine NY financial companies which suggest high-interest loans secured by a house got an invitation to the court from the Department of Financial Services. Companies are required to provide full information concerning their activity. It is known that the companies don’t make sure that the consumer is able to repay the short-term loan. The agreement is designed so that home foreclosure is the most likely outcome.
Some agreements set terms which allow the lender to whip away home, some property of other real estate in case of even one payment failure.
Ben Lawsky, managing director of the Department of Financial Services considers such behavior as conscienceless. It is unlawful and violates human’s rights.
The probe is organized with the purpose to find out whether burdensome conditions, huge advance payments, extremely overvalued interest rates and the huge amount of regular payments are knowingly set.