Payday lending legislation is taking a new turn in 2014. Surely, the industry had to answer to a certain amount of criticism that it receives regularly. This time more improvement is expected as the previous legislation didn’t make it through the Senate.
As of today, payday loans represent short-term unsecured loans offered to the customers at rather high interest rates. They usually have 3-digit APR and are very much criticized for that. They are also accused of leading customers into a debt trap. This is the reason why the ideas about the new legislation are in the air and that new bills that will restrict the interest rates are necessary.
Surely, payday lending industry cannot stay partial to such introductions. Their representatives defend their rates and say that they are more than legitimate and, moreover, they are absolutely transparent and clear – no strings attached. Besides, people who apply for their services know what they deal with and are well aware of the short nature of the product as well as their rates.
The loan industry representatives stress a lot the fact that the customers who come to them know the cost of the loan and they go on using the product nonetheless. Besides, there is no such thing as the debt circle as the majority of customers handle their repayment in time, so the facts the opponents rely on are not strictly to the point.
For instance, as of the Advance America statistics, about 95 % of their loans are repaid in time and only 2.5.% are late and 2.5 are just lost. So, the data is quite eloquent.
The representatives of the payday loan industry offer the legislative body to pay more attention to illegal lenders and various companies that operate illegally instead of trying to impose more restrictions on law-abiding companies.
The proponents keep saying that it is easy to treat every payday lender evenly, decent or not. However, it is quite clear that this is not the right approach. There are good and law-abiding lenders who run their business well and they get their profit in a natural and decent way; and there are scammers who just care about profit at all costs and these are the ones the government should be worried about.
At the present moment the legislation that will cap payday loans at 36% is considered. There are states with such small loan cap already; however, some still have payday loan interest rates not that strictly fixed. Surely, such alternation is likely to bring a lot of payday loan business to their closure; however, time will show whether the bill will pass the Senate or not this time.