Much has been written and litigated over the past couple of years about predatory lending by banks. However, little has been written about predatory servicing of loans by servicing companies.

Predatory lending is a term used to describe unfair, deceptive, or fraudulent practices by a lender while dealing with a borrower during the loan origination process. Those practices include providing a loan to a borrower whom the bank knows cannot re-pay the loan or charging excessive fees, points and expenses for the loan.

Predatory servicing however is a term used to describe unfair, deceptive or fraudulent practices by a lender, or another company which services a loan on behalf of the lender, after the loan is granted. Those practices include also charging excessive and unsubstantiated fees and expenses for servicing the loan, wrongfully disclosing credit defaults by a borrower, harassing a borrower for repayment and refusing to act in good faith in working with a borrower to effectuate a mortgage modification as required by federal law. In each such instance, a borrower may have a cause of action against a lender, or its servicing company, for predatory servicing.

Predatory servicing even takes place while a borrower is in bankruptcy. In some instances, a loan service provider will submit a proof of claim during the bankruptcy process and include unwarranted and unsubstantiated charges to the outstanding loan balance in an effort to recover additional profits from the bankruptcy estate.

For more information regarding predatory servicing, or to discuss a potential claim, you can contact Peter Moulinos at peter@moulinos.com.