Obligations of Lenders
By entering into a legal contract with debtors, lenders take on responsibilities -- both legal and ethical.
- Lenders must sell appropriate instruments to their clients - given the complexities of many debt arrangements, it's easy even for educated borrowers to get "suckered" into contracts verging on extortionist. Lenders are obligated to "play fair" when it comes to servicing their clients. They shouldn't oversell products or urge clients to take on more debt than they can comfortably meet.
- Lenders must provide timely, accurate, and complete information about their products. Lenders who fail to disclose fees or penalties associated with their products can be penalized. Similarly, lenders should not bury tricky terms in contracts or stipulate abusive terms or disproportionate means of collection. Obviously, if a lender purposely misleads a borrower about terms and conditions and later tries to enforce said stipulations, this behavior would be unfair as well.
- Lenders have an obligation to deal justly with borrowers. Lenders who take advantage of senior citizens, the mentally disabled, or individuals who don't speak the language well can be heavily penalized. Similarly, lenders may not switch around terms, fees, and contract stipulations once an agreement has been signed. Nor may lenders prevent clients from taking matters to court. Lenders must also avoid charging exorbitant rates or levying ridiculous fees or penalties.
- Lenders should be watch-dogged by independent agencies and consumer interest groups. Only when lenders' practices are completely out in the daylight can consumers get a truly fair shake. When lenders escape detection for illegal or immoral business conduct, the entire system suffers.
- Lenders must provide borrowers neutral access to services. Lending should not be contingent on race, ethnicity, sexual orientation, gender, societal status, IQ, or any other factor. Discriminatory lenders should be "outed" as such and punished accordingly to discourage bad practices.
- Lenders who violate laws like the Fair Debt Collections Practice Act should be brought to justice. Many consumer advocates believe the federal government (along with state governments) should provide more legal safeguards for borrowers to prevent predatory lenders from abusing uneducated, misinformed, or otherwise under-serviced consumers.