Predatory lending is the practice whereby a lender deceptively persuades a borrower to agree to abusive loan terms. It is closely tied to the concept of subprime mortgage lending, which is the practice of making loans to borrowers who do not qualify for the best market interest rates (people with poor or non-existent credit history or low income). A lender may be expected to require less favourable loan terms in exchange for dealing with a comparatively more risky borrower. But, if the surrounding circumstances include a vulnerable borrower easily taken advantage of due to their own desperate financial circumstances, the situation may be characterized as predatory. Although anyone could be a victim of predatory lending, older adults often fit the profile of having a scant (or even non-existent) credit history, low income, and financial need, all of which predatory lenders tend to seek out.
Predatory lending is a well-known phenomenon in the United States but it is much less known in Canada. This study paper explores the reasons for its low profile, namely the underlying assumptions that the structure established by both the Canadian mortgage market and Canadian legislation are such that there is little cause for concern. The study paper's focus is primarily on how predatory lending may affect older homeowners, but similar issues may arise in connection with individuals who are purchasing a home and obtaining a new mortgage.
Although this study paper does touch upon options for reform from American jurisdicitons, it does not provide in-depth evaluation or make recommendations for reform. Rather, the aim of the study paper is to provide a point of departure for further discussion, analysis, and investigation.
