Predatory Lending And Punitive Damages
| Predatory lending practices are fast becoming a major issue of concern for the U.S. legislators. As per the law, predatory lending is an illegal practice and an offence.
Any lender resorting to such unscrupulous practice is punishable under the jurisdiction of the federal law. If the lender is found guilty, he has to pay for the damages caused to the borrower.
However, in certain special circumstances, the court of law might also award punitive damages. Courts may permit an award of punitive damages to the plaintiff when the conduct of the defendant is found to be intentionally malicious. Punitive damages, also known as exemplary damages, are provided in addition to compensatory damages and are intended to punish the defendant and to discourage the conduct of the type the defendant is engaged in. Every country has its own regulations regarding punitive damages. In case of the United States, these damages are a matter of state law.
Every U.S. state has its own individual provisions to deal with cases related to predatory lending. According to California Financial Code 4970, predatory lending is strictly prohibited. The law prohibits practices such as ignoring the financial ability of the borrower while issuing loan, encouraging a consumer to default on an existing consumer loan so as to obtain a refinance loan and issuing a loan without providing the necessary consumer specified disclosure. Under the California Financial Code 4978, attorneys are provided incentives for discouraging and prosecuting predatory lenders. These incentives include mandatory attorney fees, an award of punitive damages and other statutorily prescribed damages. Under section 3294 of Civil Code, even consumers can be awarded punitive damages from the lender.