High-Priced Loans, High-Pressure Tactics

June 18, 1998

The high-cost mortgage industry is one of the fastest growing segments of the US financial community. Largely a phenomenon of the 1990s, such loans have totalled nearly $500 billion in the past eight years.

The segment is made up of companies that offer loans to folks whose credit is less than pristine. But nothing prevents them from selling high-cost loans to naive customers with perfect credit, as well.

In general, industry analysts say, such finance companies are enormously profitable because they charge significantly higher rates and fees than do major banks. By law, there are no ceilings on interest rates or fees that such companies can charge, but the law requires that borrowers be made aware of all fees and interest rates.

Not every company offering high-cost loans engages in questionable sales tactics. But many do, experts say. And they warn potential borrowers to be on guard.