by Colin Britewell

Created on: August 25, 2007

Dark and treacherous woods are not the only place to find cruel predators. Their habitat is just as common in financial markets with seductive sign-age promising No Credit? No Problem!' Talk to millions who jumped at easy credit offers and see it is anything but no problem'.

First of all, the offers are not about service to the consumer. They are yet another highly effective revenue producer for unethical lenders. Credit-starved consumers, declined credit cards for years because of bad payment history, jump at the opportunity to receive a card with pathetic $400 or $500 limits and colossal annual percentage rates; 30% and higher are not uncommon.

It gets worse. Still more of the predators require a savings account' in connection with the card as a security deposit. It might earn minuscule interest, but nowhere near an offset for the oppressive interest rate on the card. Companies issuing such cards have to be up front with this information, but they count on unwitting applicants not reading, or disregarding the fine print with these disclosures. By the time the savings is deposited (almost the amount of the credit limit), and application and handling fees are paid the consumer ends up with a bigger stake in the card than the company who issues it not the credit card to which those with good credit are accustomed.

These practices are no problem' for anyone but the poor souls who use the enslaving cards. The program works best because it is marketed to borrowers who have a predictable record of irresponsible credit handling, or who have a legitimate string of bad luck financially. The fun really begins when a card holder defaults.

The account is then sold further down the food chain to an even more unethical entity (if you can believe that). That which started in the halls of well known institutions among $500 pin stripes ends up among polyester leisure suits and pizza boxes. The account is burdened with more fees until the remaining debt is sometimes doubled in some cases and it's perfectly legal. If the same money had been borrowed from an individual and loaded with this kind of additional debt, the lender's doing jail time!

More hideous is the same kind of tactic used in the darker side of the home mortgage industry. Recent years have seen the proliferation of home loans made to individuals who may not even have been considered before the lending boom. Lured in by an offer of quick approval, the borrower's easily overwhelmed in the fine print. The adjustable rate mortgage (ARM) is a popular arrangement. At its inception, the home loan may have already stretched the limit of what the consumer can afford. His financial back is broken when the contract adjustment happens. An increase of a few fractions of a percent can send a family to certain foreclosure. Loans like this have made billions for mortgage banking, but in the long run signal a train wreck for the nation's economic well being.

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