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Vulnerable consumers are being coerced into signing up for high-cost, unaffordable loans.

For 61-year-old Yasmeen El, of Philadelphia, it started with an envelope arriving in the mail. Inside was an unsolicited "live check" for $4,000 from Household Finance (HFC). El was in luck - or so she thought - when HFC, the nation's oldest consumer finance company, came knocking. She needed money to repair her roof in that spring of 2000, and the check had arrived just in time.

What she didn't know was that she was a prime candidate for predatory lending.

"Four days after I deposited the check, I got a call from the local office; they needed me to come in to their office and sign some additional papers," she says.

While she was there, the loan officer convinced her that she needed credit insurance, El says. She was assured the cost would be only $160.80, for 60 months coverage, so she figured she could pay it out of the $4,000 she had borrowed.

"Oh, no, no, there is a way for us to do it and include it in the loan," El remembers the loan officer saying. "So he goes and gets the paperwork and I sign additional papers."

A few days later, El says, she received a letter from HFC thanking her for payment in full.

She soon realized that HFC, the consumer finance arm of Household International, refinanced her loan when she went to sign for what she thought was a $4,000 loan and $160 for credit insurance.

"They refinanced my $4,000 loan without me knowing it, and I ended up with an $8,000 loan, without receiving a penny, and getting insurance that I really didn't want... I would have given them $160 for the insurance, but they didn't want it that way" El says.

The way IFC wanted it, according to El, was for her to pay $136.14 monthly, for the interest rate and fees that had no relation to her credit risk, The interest rate and fees are simply whatever the lender can get away with. Predatory red flags include "packing" the loan with unnecessary insurance, such as in El s case, attaching a "balloon" payment at the end of a loan or flipping it, repeatedly refinancing a loan often at high costs.

"Credit insurance is one of the biggest consumer rip-offs," says Michael Hudson, who documented numerous predatory lending cases in his book, Merchants of Misery: How Corporate America Profits from Poverty.

Predatory lenders make their money by adding extras, he says.

"What a lot of these companies will do, whether it's a used-car loan, consumer finance loan or mortgage, they want to throw in as much extra stuff as they can," Hudson says.

Hudson, who is a reporter for the Roanoke Virginia Times, says it's easy for loan companies to add credit insurance without the borrower's consent. "There are a lot of people out there who end up with credit insurance, who either don't know they're getting it, or they don't understand that they don't have to get it, or they don't understand how much it's costing them."

Balloon payments are another way consumers get caught. The arrangement is commonly used to reduce a borrower's monthly payment. The final or "balloon" payment is used to make up the difference at the end of the loan. A predatory lender may entice consumers with signs that say, "Low Monthly Payments," then conveniently fail to disclose the balloon payment waiting down the line. In some cases, if the monthly payments are too low, that balloon payment could almost be as high as the principal of the original loan. If the loan is secured with the borrower's home and he or she cannot make the balloon payment, the borrower faces foreclosure. Sometimes a borrower has to refinance the balloon, and the cycle starts all over again.

Flipping is the other commonly used method, in which the borrower's loan is refinanced again and again, often at higher costs to the borrower.

Predatory lending is the civil rights issue for this century, says Rep. Stephanie Tubbs Jones (DOhio).

"Particularly for our community, African American wealth is usually passed from one generation to the next, and the biggest single asset is a home," says Jones, a co-sponsor of a bill to bolster consumer protection efforts. "And if you allow the predatory lenders to take that wealth out of our community, they're stealing wealth-building from our people."

A 1997 study by Harvard's Joint Center for Housing Studies supports Jones' point. Home equity accounts for a very large percentage of minority wealth - 75 percent for Blacks, 69 percent for Hispanics - according to the center.

Often, predatory lending involving older consumers never makes the news because victims don't want people to know they were duped..

"I didn't want to go to anybody because I hated admitting I let these people trick me," El says. "There was a lot of pressure and embarrassment. It was a constant hassle. I got two loans in five days; even that sounds stupid. I hope people wouldn't think that I am just that dumb that I would refinance a loan within five days and get absolutely nothing out of it."

El may not have gotten anything from refinancing her loan, but within a year, she'd gotten BC's attention. She joined the Association of Community Organization for Reform Now (ACORN), a national grass-roots group and one of the leading critics of predatory lenders.

After she spoke before the Philadelphia City Council about what happened to her, HFC contacted her, El says.

"They called and said they didn't realize there was a problem," she says.

El's credit insurance was voided and her debt reduced to the original $4,000 loan.

Craig Streem, a HFC spokesperson, would not comment on El's case. He agreed, however, that a lot of disputes arise from credit insurance policies.

"What we find is that people took the insurance and they understood what it was, but because someone encouraged them to opt out of it, they decide to do so," he says.

HFC, based in Prospect Park, Ill., has procedures to educate borrowers and suggest lending options to them, Streem says. For example, borrowers with home equity loans must watch a 15minute video explaining the risks of using your home for collateral.

"If you don't want to watch it you have to sign a paper stating, I was asked to watch it and I decline," Streem says. IFC has been offering consumer loans for123 years. Its new policies have been in effect since December, Streem says.

For loans similar to Yasmeen El's, Streem says HFC has had a "30-day free look" policy in place since 1980 that allows borrowers a full refund if they change their minds. HFC has met with ACORN about industry practices, and would do so again, he added.

Jeff Ordower, head organizer of ACORN's Philadelphia branch, still calls HFC the region's worst predatory lender.

"First of all, they're the most brazen," Ordower says. "Their job is to get you in, and sort of strip the equity in your house.

"We have done numerous actions against HFC, most recently in Washington, D.C., where 600 people hit their government affairs office." Ordower says there are plans to confront HFC at the company's May shareholders' meeting in Florida. In April, Household International reported a record first quarter, with net income rising 16 percent to $432 million.

Another lender that ACORN has been warning consumers against is The Associates First Capital. But if its loan portfolio is any indication, ACORN isn't reaching borrowers. In 1999, the total dollar amount of The Associates' outstanding consumer finance loans was $29.7 billion. The company serviced 480,000 home equity loans that year.

Ordower said the loans from companies such as Household Finance and The Associates are fed through a lending chain that links home repair contractors, loan brokers, and small and mid-size lenders and culminates on Wall Street.

A broker may take a loan to a small finance company, which in turn may sell it to a larger firm such as The Associates or an even more well-known firm that then mixes it with its prime rate loans.

Often these things appear in the investment portfolio of a socially responsible company because it's supposedly giving credit to underserved communities, Ordower says. These loans pass through the social safety screens and are sold as high-impact community investments. So if you have everything mixed together - 10 loans at 19 percent interest mixed in with 50 loans that are A- I- nobody is going to notice that.

Allegations of fraud and deceptive practices have plagued The Associates for years, prompting a 1997 ABC Prime Time Live news investigation. Prime Time concluded that The Associates questionable practices seemed to be company policy. Phillip White, a former assistant manager for an Associates branch in Alabama, told Prime Time that there was always a designated "forger" in the office. White also alleged at least "two-dozen" instances of forgery in two Alabama offices. Ford Motor Corp, which owned Associates at the time, told Prime Time they investigated White's allegations and "found nothing."