There has been a significant increase in a number of different types of fraud in the last several years, and experts in the insurance industry say that they have not been immune to the trend. The number of questionable insurance claims made over the course of 2012 was up 26.7 percent from the total observed two years earlier, according… Read More
If you are unsure if the lender you are working with is legitimate, there are a few simple tests you can perform. Ask them to mail you the contract instead of sending it by email (they avoid this because it constitutes mail fraud). Question their practices (they often turn rude and aggressive at this point). Take a closer look at the website (usually incomplete, with no posted address and only a short contact form). Google them (odds are that there will a posted warning about the company).
But recently the scammers have been saying that they are from established, authentic banks. Here’s one case we received by email this week: I received a call from a Donald White. He said he is from Lending Tree and that I would have to pay the first month and last month payment in order to receive a loan. Is this true? They are asking for $250 sent by Western Union.
One of the reason banks buy credit derivatives (read: protection money) is to cover their losses in case borrowers default on mortgages. With less to lose, lenders can afford to offer more and riskier loans. But it is going to cost them … and therefore us … a lot more to insure those loans. Between September and December of 2005, the price almost doubled for credit derivatives on subprime ARMs.
This is a prime example of a predatory lending practice called “single-premium credit insurance.” A common practice with finance companies, this mandatory insurance policy claims to protect the borrower in the even that they lose their job, become disabled or otherwise cannot make their monthly payment. In reality, this product is highly overpriced and unnecessary. To make matters worse, many subprime borrowers roll these fees into their loan and end up paying interest on these charges. Consumers Union has called single-premium credit insurance “the nation’s worst insurance rip-off” and a “$2 billion a year rip-off.”