Feds Issue New Rule to Curb Payday Lending Abuses

[amastewa93]

From: PublicNewsService.org



Feds Issue New Rule to Curb Payday Lending Abuses


by Susan Potter
October 6, 2017
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Consumer advocates are praising a new rule issued on Thursday by the Consumer Financial Protection Bureau (CFPB). It requires payday lenders to start requires payday lenders to start verifying a borrower's ability to repay before rolling it over into a new loan.

The rule aims to prevent a situation where desperate people borrow more money just to repay prior loans, and get hit with fees that often exceed the amount of the original loan.

Diane Standaert, director of state policy at the Center for Responsible Lending, says this rule will curb some serious industry abuses.

"We know that the debt trap of repeat re-lending is the core of the payday lender and car-title lender business model," she says. "So, that's why this rule is a significant step forward in stopping the debt trap of unaffordable payday loans."

The new rule goes into effect in July 2019. It requires payday lenders to verify specifically that the person will be able to repay the loan and still cover living expenses and major financial obligations.

Payday loan industry supporters argue that this type of short-term loan offers credit and flexibility to people in financial distress.

Conservatives in Congress are expected to try to repeal the rule using the Congressional Review Act before it even goes into effect. And in 2018, President Trump will get the chance to nominate a new head of the CFPB. Its current director, Richard Cordray, is a holdover from the Obama administration whose term ends next summer.

[Smallsteps]

I will never understand how some politicians think.
This pay day loan industry and others that prey on the financially desperate should be scrutinized much closer but the last administration was more concerned on if consumers were being sold one investment over another for fees.
Quite frankly some items require the buyer to beware ( for themselves) but the many groups/ businesses that target the poorest in society should be looked at before just watching out for those who have enough for investments.

Where is any support in financial education??

[titlelo]

Smallsteps, I totally agree. I think the short-term lending industry should be better regulated. If anything, a portion of the taxes from short-term lenders should be used to support financial education in low income neighborhoods. But the chances of that happening is slim. A better idea would be if all states required lenders to verbally disclose that short-term loans, like title loans and payday loans, are meant to be used for emergency situations only. Also, that they are meant to be payed back in a month. They're not supposed to be used like installment loans.

[Joan.of.the.Arch]

(Cordray is already gone from CFPB.)