Credit for individuals has been in use—and regulated—since the earliest days of recorded antiquity, and probably well before that. Credit regulation began at least with the laws of ancient India and Babylon, but it probably started much earlier with nomadic hunter-gatherer chieftains who desired to straighten out borrowing and lending misunderstandings and abuses among clan and tribe members. In the United States, credit regulation began in the colonial period with the adoption of England’s legal system, and it continued after the American Revolution, expanding its geographic reach with the westward migration of settlers.
Throughout American financial history through World War II, mortgage and consumer credit was often hard to obtain, but since 1945, the amount of outstanding credit subject to regulation has taken on massive proportions. Interestingly, however, the postwar growth of credit has not been nearly as large as is often believed when measured in real (inflation-adjusted) terms. It is reasonable to assume that a complete return to a peacetime economy, occurred by 1955 following the Korean War. Calculating real compound annual growth rates from that year to 2008, mortgage credit grew 5.2 percent annually and consumer credit 3.9 percent. Both amounts actually declined in 2009.
If you are facing foreclosure, you may be a victim of predatory lending. Speak to an experienced Draper Utah foreclosure lawyer.
Like TILA, HOEPA has proven to be a relatively ineffective tool for controlling predatory lending. The vast majority of subprime loans do not meet the definition of “high-cost,” and therefore are not subject to any of HOEPA’s protections or prohibitions. HOEPA excludes some questionable costs—such as high prepayment penalties—from its points and fees threshold, and does not cover purchase money mortgages, reverse mortgages, or home equity lines of credit.
In addition, although HOEPA bans some predatory practices for covered loans, its prohibitions are either too limited or too onerous to provide adequate protection for borrowers. HOEPA, for example, appears to recognize that asset-based lending is abusive, but applies only when there is a “pattern or practice” of asset-based lending, and not when a lender fails to consider the plaintiff’s ability to pay in any one instance. HOEPA thus insulates from prosecution all but the worst asset-based lenders. In short, although HOEPA targets the worst loans, it has not been able to stem the rise in abusive lending practices.
Real Estate Settlement Procedures Act (RESPA)
The Real Estate Settlement Procedures Act (RESPA) ensures that borrowers obtain basic information about their loan during the transaction, prohibits certain practices that may increase settlement costs, and imposes certain requirements on loan servicing practices. RESPA applies to “federally related mortgage loans” secured with a mortgage on a one-to-four family residential property, which includes most home purchase loans, assumptions, refinances, home improvement loans, and equity lines of credit.
RESPA requires that lenders detail the costs associated with settlement, outline lender servicing and escrow account practices, and disclose any business relationships between settlement service providers. RESPA also prohibits certain potentially predatory practices that could increase settlement costs to the borrower. For example, RESPA makes it illegal to give or accept any item of value for referrals of settlement services or to give or accept charges for services not actually performed.
Finally, RESPA requires loan servicers to follow certain practices related to the servicing of the loan and any escrow account used for paying property taxes, insurance, and the like. Servicers must respond to the borrower’s written questions or complaints about servicing of the loan within 60 days, and must provide the borrower advance written notice before servicing of the loan is transferred to a new servicer. Although RESPA does not require lenders or servicers to maintain escrow accounts, where such an account is maintained, RESPA places limits on the amount of money the servicer may require the borrower to pay into the account, and requires that the servicer make payments on time to avoid late charges.
As important as these protections may be, RESPA’s reach is limited. Although some of its provisions create an explicit federal cause of action, thus allowing borrowers to file private suits, others (including some of the disclosure provisions) do not. Furthermore, disclosures offer only partial protection, for the simple reason that many borrowers do not understand the content of the notices they are given. In addition, settlement costs and servicing practices—while they can be unfair and abusive—are not the primary methods by which predatory lenders strip equity from their victims. Thus, for a predatory loan victim like Mary, who is in need of a statute that will offer her meaningful protection and relief, RESPA presents many of the same practical shortcomings as TILA and HOEPA.
Equal Credit Opportunity Act (ECOA) and Fair Housing Act (FHA)
Predatory lenders are by no means even-handed in where they ply their trade and whom they choose to target with their fraudulent practices. Often these lenders focus their exploitative practices on traditionally underserved populations where minorities, women, and the elderly are disproportionately represented. This practice, known as “reverse redlining”—defined as marketing bad loans to an area because it is home to members of a certain racial, ethnic, or other group protected under the law—is a civil rights issue, because it causes significant harm to minority communities in particular.
Like traditional redlining—the practice of denying prime or good loans to a minority area or community—reverse redlining has, in recent years, been held to violate both the Fair Housing Act (FHA) and the Equal Credit Opportunity Act (ECOA). Where these two laws can be used to combat predatory lending practices, the effect may be considerable, in large part due to the extraordinary range of remedies and procedural options these statutes offer.
In the broadest sense, the FHA and ECOA prohibit discrimination in the extension of credit and real estate-related transactions (defined to include mortgage lending). Both statutes permit recovery of compensatory damages (that is, money to make a victim whole for the injury suffered), punitive damages, and attorneys’ fees, in addition to “injunctive relief” (a legal term for nonfinancial steps that the court can order to right the wrong done or to prevent future harm). The FHA, in particular, provides a far more generous statute of limitations than most other federal statutes, and grants an automatic right to a jury trial. In addition, both the FHA and ECOA permit a finding of liability not just where discrimination is intentional, but also where a lending practice has an unnecessary disparate impact (a disproportionately negative effect) on a protected group. Given the right facts and a receptive court, these are powerful tools—far more effective than anything offered by TILA, HOEPA, or RESPA.
For all that these statutes offer, however, they also pose problems for those seeking to prosecute predatory lenders. First, the FHA and ECOA were designed to provide a remedy for discriminatory conduct—that is, conduct that treats protected groups differently from nonprotected groups. To prevail under these statutes, it is not enough to show that a lender subjected an individual to unfair or fraudulent practices; the victim must prove that she was subjected to the practices because of her race (or some other protected characteristic). That means, of course, that “equal opportunity” predatory lenders—those who prey equally, for example, on white and African American communities, young and old, men and women—may fall outside the reach of these laws.
Second, even where a lender has engaged in discrimination, it is not always easy to prove, especially for an individual without significant time and resources. For example, proof of discriminatory marketing usually requires evidence of how a lender treats a larger group of borrowers within a metropolitan community. An individual victim facing foreclosure may well lack the time or resources to marshal this kind of evidence or otherwise build a winning FHA or ECOA case.
Racketeer Influenced and Corrupt Organizations Act (RICO)
Although enacted to target organized crime, the Racketeer Influenced and Corrupt Organizations Act (RICO) has been used to combat various forms of consumer abuse.36 RICO authorizes civil suits by individuals who have been injured by certain criminal activity known as “racketeering,” including mail or wire fraud. RICO prohibits persons employed by or associated with an “enterprise” (which may be a corporation or other legal entity, or an informal association of individuals) from using the enterprise to engage in a pattern of racketeering activity.
Predatory lending frequently involves mail or wire fraud. This has allowed creative attorneys to assert RICO claims against lenders engaged in abusive practices. The remedies offered under RICO make it a potentially powerful legal weapon: where a borrower succeeds in proving a RICO violation, he or she may collect treble damages (three times the damages actually suffered) and attorneys’ fees and costs, which may be substantial. Courts have interpreted RICO broadly, to cover many different types of illegal schemes, with the result that the statute offers the potential to reach a wide range of predatory lending practices. RICO’s prohibition on conspiracy to violate its provisions also opens the door to claims against third parties (such as brokers) that may have assisted the lender in implementing the predatory scheme.
Despite the protections and relief available under RICO, its utility in the arena of predatory lending has limitations. First, RICO requires proof of far more than abusive loan practices. In general, proving the complex elements of a RICO claim is difficult and costly, and there is considerable disagreement among the courts regarding the proof required to establish a RICO violation.
Second, certain requirements of a RICO claim can be particularly difficult to meet in a predatory lending case. For example, “racketeering activity” usually requires proof of fraud, which as a legal matter can be difficult to show. RICO also requires proof of a “pattern” of racketeering activity, which means that an individual like Mary, who may be victimized through a single instance of illegal conduct, cannot take advantage of RICO’s protections. And even where such a pattern of illegal activity exists, it may be difficult to establish the existence of an “enterprise” through which the illegal activity was conducted.
Finally, although RICO offers significant monetary remedies, the statute leaves some remedial gaps. It is unclear, for example, whether RICO authorizes injunctive relief. Thus, even where a borrower wins a RICO action, the court may not be able to order the lender to cease its predatory practices or to require forgiveness of the loan.
The Federal Trade Commission Act
Section 5 of the Federal Trade Commission Act prohibits unfair or deceptive trade practices. An “unfair” practice is one that causes or is likely to cause consumers “substantial injury” that is not reasonably avoidable and is not outweighed by countervailing consumer benefits. A “deceptive” practice is a material representation, omission, or practice that is likely to deceive consumers acting reasonably under the circumstances. The FTC Act’s broad prohibition against unfair or deceptive practices has been applied to a wide range of actions, including abusive lending and loan servicing practices.
The FTC Act grants the FTC authority to bring administrative and judicial enforcement actions to attack unfair or deceptive practices by individuals, partnerships, or corporations, with certain exceptions (including banks that are regulated by other federal agencies). In the administrative context, the FTC issues a complaint and conducts its own investigation. Where it concludes that an individual or entity has engaged in illegal practices, the FTC may issue a cease-and-desist order to halt the illegal activity, and may then seek consumer redress in federal court for consumer injury. The FTC may also pursue other individuals or entities that knowingly violate the standards in a particular cease-and-desist order by suing in federal court to recover civil penalties.
Independent of its own administrative process, the FTC also has the power to challenge unfair or deceptive trade practices by filing a lawsuit directly in federal court, without first making a finding of illegal conduct. Under Section 13(b) of the FTC Act, the FTC may sue in federal court when it believes that the statute has been, or is about to be, violated. The court may issue an order prohibiting the illegal practices or requiring certain action, and also may award restitution and rescission of contracts.
Where the FTC has chosen to exercise its enforcement power to attack predatory lending practices, it often has been very effective. The FTC Act’s ultimate effect on predatory lending is limited, however. The FTC Act does not authorize lawsuits by individual consumers; only the FTC (and other agencies, in the case of some banks) can pursue potential violations of the law. Enforcement is therefore constrained significantly by practical considerations facing the FTC or any other agency, including political pressure and scarce resources. Although the FTC may be able to use its limited resources to prosecute some egregious instances of predatory lending involving a widespread pattern of predatory practices, only a small fraction of individual victims obtains relief under the FTC Act, and the vast majority of predatory lenders escape its reach. Thus, a borrower like Mary would be unlikely to be the beneficiary of relief from the FTC unless Acme’s practices were sufficiently egregious that the company independently had come to the attention of the agency’s investigators, or sufficient numbers of complaints had already found their way to the FTC to warrant a decision by the Commission to invest the agency’s resources in an enforcement action. In practice, the FTC is simply not a reliable source of redress for the average abused borrower.
Proving that your lender has violated the laws is a complex process. It is best left to an experienced Draper Utah foreclosure lawyer.
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When you need legal help from a Draper Utah Foreclosure Attorney, please call Ascent Law LLC for your free consultation (801) 676-5506. We want to help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506
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Draper, Utah
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Draper, Utah
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Draper is a city in Salt Lake and Utah counties in the U.S. state of Utah, about 20 miles (32 km) south of Salt Lake City along the Wasatch Front. As of the 2020 census, the population is 51,017, up from 7,143 in 1990.[3]
Draper is part of two metropolitan areas; the Salt Lake County portion is in the Salt Lake City metropolitan area, while the Utah County portion is in the Provo-Orem metropolitan area.
The Utah State Prison is in Draper, near Point of the Mountain, alongside Interstate 15. Gary Gilmore‘s execution occurred on 17 January 1977. The Utah Legislature voted to relocate the state prison to Draper in 2014 and in 2015 approved the Salt Lake City location the prison relocation commission recommended. The Draper Prison will close in 2022. Inmates will be moved to a new prison facility in Salt Lake City; the new prison is slated for completion in mid-2022.[4]
Draper has two UTA TRAX stations (Draper Town Center, 12300/12400 South and Kimball’s Lane 11800 South) as well as one on the border with Sandy (Crescent View 11400 South). A FrontRunner commuter rail station serves the city’s west side. The city has around 5 FLEX bus routes connecting neighboring communities and two bus routes to Lehi Frontrunner Station and River/Herriman, connecting at Draper Town Center and the Draper Frontrunner Stations.
The city is home of 1-800 Contacts and a large eBay campus.
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