It's Not Predatory Lending, Really. You Just Aren't Paying Any Attention.

photo by Melissa Bowman Photography & Creative Design
(and no, I don't know if this snake does the tail-wag thing. It's just a cool snake picture.)

In the animal kingdom, there are some poor, hapless creatures that tend to get lured and caught more than others. Apparently, snakes have greater success catching frogs and lizards than birds.

The term and concept of "predatory lending," as it is derived from this practice found in the animal kingdom, is erroneously applied to humans, in my opinion. 

The term "predatory lending" assumes, that like the animal kingdom, lenders actually have some kind of mysterious biology-based power (think things like pheromones, alluring colors, acting upon instincts incapable of premeditation, biologically-driven self-destruction, etc.) to forcibly make people take on loans and debts that *surprise* they can't pay off later. The concept is based in a rather demoralizing (not to mention, biologically and philosophically inaccurate) view of humans, their reasoning power, and their ability to exercise free will. Wowza! I think a more accurate (as well as generous) view is that there is just "uninformed or irresponsible borrowing".

Please note, and this is important - I'm not talking about people who have been blatantly lied to as the victims of outright fraud or have had their identities stolen and whatnot - that is crime with a clear perpetrator and a victim. What I'm talking about is people signing up for things, making agreements and promises to pay, without having the savings or income, without getting the full story, and without understanding the terms of the arrangement - and THEN blaming someone else because they did not put in the effort to protect their finances.

I get it, I get it, though. The idea of "predatory lending" is based on the idea that lenders, like snakes, waggle their irresistible, worm-like tails at their prey, luring them close, and devouring them. Too alluring! We couldn't resist! We couldn't read the fine print! We are not responsible! Again, I don't buy it...

Why?

Because I, somehow, miraculously avoid their traps, time and time again. 

How? 

Because it's not a miracle at all. Because there is nothing special about me, in fact. Because I bother to read my mail. Because I check my accounts. Because I will call the 1-800 numbers and request the "Live Chat" features of wherever my subscription, loan, or other sensitive information is from and wait on hold for minutes (yes, it's usually minutes - only calls to get information for government services take hours, in my experience) to get all my questions answered. Yes! I have questions! You don't?

For example, this month alone, I had 3 lenders change their terms on me. Notice I did not say, "Without notifying me." That's what everyone says, claims and assumes. They don't realize, nor take responsibility for the fact that they are responsible  (by the simple nature of being a debtor) to read their mail or otherwise check in with their account to make sure it's current, nothing has changed, etc. That's why I think automatic bill pay is such a terrible idea (if you don't at least open your bill and double-check the amounts being sent out!)

As I said, this month alone, I had the following occur:

1. One lender increased my monthly owed balance by $6. Nothing that's going to put me over the edge on a monthly cash flow basis, but if I let me automatic payment go out without having checked, it would put me in delinquent status AND I'd owe them a $35 fee on top of the next payment. Ouch! (All disclosed in the bill, by the way.)

2. The same lender changed the terms of our original agreement. Instead of no interest until January 2012 (the original agreement) they changed it to end in 6 months, which happens to be THIS October. That's right, if did not pay in full next month, I'd be responsible for paying all back-interest. Good thing I had the money saved anyway before I bought the item. (All disclosed in a separate mailing, by the way.)

3. Another lender increased my monthly owed amount by $2 or something stupid. See #1. Same late fee too. (All disclosed in the bill, by the way.)

4. I found out my student loan servicer has the right to capitalize all my interest in the event I "change the status" of my account. I had no idea what that meant. So I dialed up that "Live Chat" feature and waited to speak to their rep. Yes - I know how annoying that is - it takes forever, and the person always has 20 or so automated greetings and questions you have to answer before they talk to you like a real person. But I did it. And I found that any time you change your terms, defer you payment, etc. they will capitalize your interest. That's a big deal. For those who don't know what that means, exactly, it's taking your interest balance, and adding it to your principle balance. So if you are always asking for deferments on your student loans - you are just hiking up that principle balance (and now it's corresponding interest). (All disclosed online, and probably the original agreement, by the way.)

Just another interesting thing to note: all these weirdo changes began shortly AFTER the government enacted legislation to improve disclosures on credit card mailings and to curb "predatory lending practices." What a joke! The things I've described above are the little, insidious ways lenders are (predictably) loopholing their way around that legislation and probably raking in late fees and interest charges from "uninformed and irresponsible borrowers" with great success. The late fees are all $35 dollars instead of the $25 they used to be. I think the legislation has made things worse. But that's just me.

So, check your accounts today! Oh - and if you are one of those people who truly, truly does not understand this stuff - get some help! Just call the 1-800 number until you get the answers you need! Schedule an appointment with the financial planner at your local bank or credit union - they'll probably do it for free if you have accounts there. Take responsibility for your finances. Don't just assume you are at the mercy of lenders - you aren't! You are in total control.

Also - I'm not perfect, sometimes I miss these things and get a stupid late fee. But I never blame the lender, I always blame myself for getting lazy and complacent with bill paying.