FDIC Issues Warning on Predatory Lending

The Federal Deposit Insurance Corp. has issued a reminder that it will not tolerate predatory lending and said it expects banks that engage in subprime lending to treat their borrowers fairly and make "responsibly underwritten" and priced loans.In a letter to FDIC-supervised banks, the agency warns that its examiners will take appropriate action if they spot lenders inducing borrowers to repeatedly refinance loans, making unaffordable loans based on the value of the property as opposed to the ability of the borrower to repay, or concealing the true nature of a loan from unsuspecting or unsophisticated borrowers. The FDIC letter consolidates previous agency pronouncements on predatory lending in a single document. "This policy statement describes certain characteristics of predatory lending and reaffirms the FDIC's position that such activities are inconsistent with safe and sound lending and undermine individual, family and community well-being," the Jan. 22 letter says.