Warren Buffett’s Berkshire Hathaway Unit Faces Lawsuit Over Predatory Lending Practices
The U.S. Consumer Financial Protection Bureau (CFPB) has taken legal action against Vanderbilt Mortgage and Finance, a subsidiary of Warren Buffett’s Berkshire Hathaway, accusing the company of engaging in deceptive lending practices that trap borrowers in unaffordable loans.
A Pattern of Abuse
According to the CFPB, Vanderbilt Mortgage and Finance, which operates under Clayton Homes, Berkshire’s manufactured housing business, has consistently ignored warning signs that borrowers cannot afford their loans. The company allegedly underestimates borrowers’ ability to pay debts and cover basic living expenses, leading to a cycle of debt and financial hardship.
Consequences of Irresponsible Lending
Many borrowers have fallen victim to Vanderbilt’s predatory practices, incurring late fees and penalties when they fail to make payments on time. In some cases, borrowers have been forced to surrender their homes or file for bankruptcy after defaulting on their loans. One egregious example cited by the CFPB involves a couple with three children who were approved for a home loan that left them with a mere $57.78 per month for discretionary spending after covering expenses. The couple ultimately defaulted on their loan.
CFPB Director Speaks Out
“Vanderbilt knowingly traps people in risky loans just to close a deal on selling a manufactured home,” said CFPB Director Rohit Chopra in a statement. “This kind of irresponsible lending has devastating consequences for families and communities.”
Legal Action and Accountability
The CFPB is seeking civil fines and restitution for harmed borrowers, alleging that Vanderbilt violated the federal Truth in Lending Act. The complaint was filed in the Knoxville, Tennessee federal court, where Vanderbilt and Clayton are based.
A History of Controversy
This is not the first time Clayton Homes has faced scrutiny over its lending practices. In 2015, reports surfaced alleging that the company targeted Black, Hispanic, and Native American borrowers with subprime loans they could not afford. Warren Buffett defended Clayton at the time, but the CFPB’s lawsuit suggests that the company’s practices have not changed.
The Future of Manufactured Housing
Clayton Homes is the largest U.S. builder of manufactured homes, including mobile homes, which are often the only option for people with low credit scores and incomes or those living in rural areas. The outcome of this lawsuit could have significant implications for the manufactured housing industry and the families who rely on it.
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