One thousand Maine families will be ripped off next year by unscrupulous lenders. Will someone stand up for them?

It’ll take the governor or a legislative leader. Will they act or will they be lulled into inaction because there’s so much happening, because it’s too complicated, because it can wait until next year?

A report released Monday by Coastal Enterprises Inc., a Wiscasset-based, nonprofit, community development corporation, uncovered widespread abuses in the terms of many loans made in the state.

In many states, the practices revealed are already illegal. In Maine, the law gives lenders – mostly big shops based out of state – the legal wiggle room to take advantage of people in a financial pinch with usurious loans.

Using industry data, court records and one-on-one interviews, CEI found that in 2000, Maine homeowners had lost more than $23 million worth of equity in their homes because of predatory lending practices.

People who have less-than-perfect credit scores often have to rely on what’s called subprime loans. Subprime loans – which are more expensive than prime loans because the borrowers pose a greater risk of default – usually carry higher interest rates, fees and restrictions than the loans available to people with good credit.

Some lenders have taken advantage of the market to rack up huge profits from consumers who don’t know their rights or who are particularly vulnerable to abuse.

According to the CEI report, Maine is an attractive target for abusive loans. The state’s population is older, there’s a high home ownership rate, many people are economically distressed and the hot real estate market means that they are often house rich but cash poor. The study says that there are about 8,000 subprime mortgage loans made in Maine every year and, of those, about 1,000 show characteristics that can be described as predatory. The majority of the subprime loans – which mostly involve refinancing – are made in rural areas and, among cities, the Lewiston-Auburn region has the highest concentration of subprime loans in the state.

CEI defines several tactics as predatory, including prepayment penalties, loan flipping and excessive fees. The study also determined that at least 15 percent of the families who took out subprime loans between 2003 and 2005 in the state could have qualified for a less expensive option.

Prepayment penalties are particular egregious because borrowers get locked into high-cost loans even if their financial situation improves or a lower-cost loan becomes available.

Marketing the loans as a way to consolidate debt or lower monthly payments, some lenders aggressively pursue customers living on the financial edge. They disguise the true costs of the loans they are proposing – sometimes even breaking the law by not providing required truth-in-lending statements and good faith estimates.

The argument against cracking down on subprime lenders is that it would deny people with a troubled financial history access to credit, but the evidence from other states, which offer greater consumer protection, demonstrates the argument’s weakness. North Carolina, which is considered a “best practices” state, has saved its residents at least $100 million with tighter lending regulations, according to a 2003 University of North Carolina study, without restricting access to credit in the subprime market. The tough laws, instead, drove the abusive lenders out of the state.

Consumers can protect themselves by understanding the pitfalls of too-good-to-be-true loan offers. They should make sure they fully understand the terms of any loan, including whether it includes prepayment penalties or requires mandatory arbitration. They should also be sure to shop around before making a commitment. A 15-minute call to a legitimate lender is usually all it takes to get a general picture of what type of loan you qualify for. An hour invested can save thousands of dollars. But even an informed consumer can be taken. The people who make their living selling these types of loans understand how to disguise the true costs.

Most lenders don’t use predatory tactics, but recognizing the ones that do can be a challenge even for the informed borrower. That’s why state oversight is so important.

If the Legislature will act, it can save a thousand Maine families from bad loans next year.