ANSWER:
The OCC has identified some indications that could be considered abusive lending practices:
Collateral or Equity “Stripping” - loans made in reliance on the liquidation value of the borrower’s home or other collateral, rather than the borrower’s independent ability to repay, with the possible or even intended result of foreclosure or the need to refinance under duress;
Pricing and terms, whether interest rates or fees, that far exceed the true risk and cost of making the loan;
Targeting persons, such as the elderly, women, minorities, and persons living in low- or moderate-income areas, who are perceived to be less financially sophisticated or otherwise vulnerable to abusive loan practices;
Inadequate disclosure of the true costs and risks of loan transactions;
Lending practices that are fraudulent, coercive, unfair, deceptive or otherwise illegal;
Loan terms and structures, such as negative amortization, when designed to make it more difficult or impossible for borrowers to reduce their indebtedness;
Aggressive marketing tactics that amount to deceptive or coercive conduct;
Padding/Packing - charging customers unearned, concealed or unwarranted fees;
“Balloon” payment loans that may conceal the true burden of the loan financing and may force borrowers into costly refinancing or foreclosure situations;
Flipping - frequent and multiple refinancings, usually of mortgage loans, requiring additional fees which strip equity from the borrower; and/or
Collection of up-front single-premium credit insurance - life, disability, or unemployment, when the consumer does not receive a net tangible financial benefit.
Reference: OCC Advisory Letter 2000-7.