SerpApi.Org
A Minnesota-area home seller named Chadwick Banken has been determined liable for defrauding East African Muslims in “contract-for-deed” scams that left his victims houseless and penniless.
“Me and my kids — we got justice at least,” said Abdinoor Igal, who fell victim to one such scam and spent one year living in his truck as a result (1). He lost around $170,000 to a contract-for-deed scam from Banken.
Must Read
Jeff Bezos backs a platform that lets anyone invest in rental homes for as little as $100 — 6 ways to build wealth like a landlord without actually being one
Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here’s what it is and 3 simple steps to fix it ASAP
Vanguard’s outlook on U.S. stocks is raising alarm bells for retirees. Here’s why and how to protect yourself
A jury found Banken civilly liable for violating the Minnesota Human Rights Act after he specifically targeted Minnesota’s Somali Muslim community with “Shariah compliant” contracts.
The ruling comes at a time when Somali Minnesotans are facing increasingly racist rhetoric — for example, when a right-wing influencer claimed the community was involved in widespread daycare fraud (2).
Executive director of the Islamic Association of North America, Imam Yusuf Abdulle, said at a community gathering in Minneapolis that the recent racist attacks “are fueled by years of reckless rhetoric, political scapegoating, and media narratives that repeatedly associate Somalis with crime, danger and social problems.”
Here’s what to know about Banken’s scheme.
Banken’s ‘contract-for-deed’ scam
Many Muslims follow Islamic principles that prohibit them from paying or receiving interest (3).
“Islam’s aim from any financial transaction is to maintain economic justice between those who have and those who have not,” Wafiq Fannoun, president of Reba Free, LLC told the Federal Reserve Bank of Minneapolis. “It is essential in Islam that all parties involved (…) share the actual profit or loss of a venture, and that no one gets predetermined compensation such as interest.”
Minnesota has a sizable Somali Muslim population which Banken targeted with his “Shariah compliant” contract-for-deed deals, which he said wouldn’t come with interest.
Instead, he would give his Muslim buyers contracts that not only came with high interest rates, but also came with worse sales prices, down payments and monthly payments than what he offered other buyers (4).
Contracts for deed are not inherently illegal, but they can frequently be predatory (5). In a contract for deed, the seller keeps the house’s legal title until the buyer has finished making all of the payments. The seller keeps the title while the buyer pays for things like property taxes, insurance and repairs.
Contracts for deed don’t provide buyers with the same legal protections that they would get with a traditional mortgage. Banken took advantage of that by forcing sellers to sign up for very short-term loans with large down payments, then making them pay large “balloon payments” at the very end that they were unlikely to be able to afford (6).
Once the seller could no longer pay, they were forced out of the house without any of the money they put into it, often leaving them without a home or money for lodging. From there, Banken could offer the same property up to a new buyer — who he would similarly force out with a contract for deed.
A press release from Minnesota Attorney General Keith Ellison’s office calls that process a “slow flip (6).”
“Buying a home is often the biggest and most significant purchase any of us makes, and Chadwick Banken set homebuyers up to fail so he could profit,” said Ellison. “I am extremely pleased that we were able to hold Banken accountable at trial for the predatory and unlawful scheme he ran.”
The Minnesota attorney general’s office was the group who originally filed the lawsuit against Banken (7).
Chadwick Banken did not immediately respond to Moneywise for comment.
How to spot and protect yourself against contract-for-deed schemes
Contract-for-deed schemes tend to target people with poor credit who wouldn’t be able to qualify for a traditional home loan (4).
Banken also specifically targeted a religious community who had limited options for home purchase — as well as an immigrant population that might not speak English natively or have the money to hire a lawyer (1).
Contract-for-deed scams don’t always use that specific wording. The Consumer Financial Protection Bureau says the scam could also go under names like “bond for deed,” “land installment contract” or “buying on contract (5).”
If you’re offered a way to buy a house that doesn’t require a credit check or accepts people with very poor credit, that can be a red flag. It’s also unusual to pay the seller directly, instead of paying a trusted third party such as a bank.
Also be wary of any house buying contract that says it doesn’t charge interest or is unclear about what, specifically, you’ll be paying as part of the agreement.
If you’re not part of the groups that are generally targeted by these schemes, watch out for your friends or family who are. If they mention a deal on a house that sounds too good to be true, make sure they know what they could be getting into.
You May Also Like
Here are the 7 top habits of ‘quietly wealthy’ Americans. How many do you follow?
'Gold still crashing!': Robert Kiyosaki admits he was wrong — but doubles down on his $35K prediction
The tax breaks in Trump's 'big beautiful bill' expire after 2028 — and experts say most people won't act in time. What to do before the window closes
I'm 49 years old and have nothing saved for retirement. What do I do? Don't panic. Here are 7 ways to catch up fast
Enjoyed this Moneywise story? Click Follow above for more. To get our best content and exclusive interviews first, join 250,000+ readers who subscribe to our weekly newsletter.
Article Sources
We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines.
ProPublica (1), (7); Minnesota Reformer (2); Federal Reserve Bank of Minneapolis (3); Star Tribune (4); Consumer Financial Protection Bureau (5); Minnesota Attorney General (6)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
