Consumer Financial Protection Bureau Tackles Payday Loan Debt

New rules seek to protect consumers from payday loan abuse

Consumer Financial Protection Bureau Tackles Payday Loan Debt
March 22, 2016

The Consumer Financial Protection Bureau (CFPB) will release new regulations aimed at the payday loan industry in the spring, the agency announced in January. These regulations will help to reduce consumer abuse.

Research by Pew Charitable Trusts shows that 12 million people make use of payday loans every year, with the fees on these loans adding up to $7 billion. The average borrower uses payday loan services five months every year and pays fees of $520 on an average transaction of $375 every pay cycle.

Many expect that the new regulations will mostly affect the terms and conditions of the loans that regulate the interest rate and fees that can be accessed. While experts do predict the loans that are the most harmful to consumers will be blocked, they also believe that the industry as a whole will continue without much change for those payday loan companies that operate legitimately.

New measurable guidelines that can easily be enforced are expected. Most of these are likely to center around the borrower’s ability to pay back covered loans that must be repaid within a maximum of 45 days. The CFPB cannot regulate the interest rates on loans or ban high-cost loans, but they can create new guidelines detailing how repayments are structured. While the agency cannot create rate caps, they can create underwriting standards and regulations that force lenders to prove that borrowers can repay their loans, as well as set limits on junk fees and the number of times a borrower can refinance or rollover their debt.

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Brittany | 03.22.16 @ 16:02
I think adding more protection to financial things is a huge bonus, it makes people more likely to want to invest and/or use these services.
Steffanie | 03.22.16 @ 16:04
Better fees for the consumer would be good. It seems like you would have to be pretty desperate to use these loan places with the fees they charge. Hopefully we never have to.
Kyle | 03.22.16 @ 16:04
This is truly great and beneficial to people who uses these kinds of services.
Erin | 03.22.16 @ 16:04
These things are just another way to hit people when they are down. I'm glad there are better protections in place and hope that even more can be done in the future.
Carla | 03.22.16 @ 16:04
I can see where it is easy to get caught up in payday loans when you live paycheck to paycheck. I guess some regulation is better than none but I hope more attention is brought to those crazy fees sometime later on.
Kailie | 03.22.16 @ 16:06
I feel like these types of things tend to add insult to injury when people are already out and down on their luck.
Crystal | 03.22.16 @ 16:06
I definitely like the fact that more protection is being offered to the consumer. It just saddens me that payday loans are needed at all. The typical family can barely survive week to week. Wish there was more being done on that front too. Maybe soon!
Sara | 03.22.16 @ 16:06
More protection is always great. Though for these payday loans you have to be pretty desperate for money to even use them.
Chrisitna | 03.22.16 @ 16:07
Glad to hear they are implementing new regulations on this industry! I know several people who have really gotten burned by payday loans and their outrageous rates.
$commenter.renderDisplayableName() | 01.26.21 @ 20:49