CFPB’s New Steps to Regulate Payday Loans

The Federal Consumer Protection Bureau tends to impose more and more regulations over payday lending recently.

The research shows that about half of borrowers were in need of a second loan after the first one was taken and a fortnight has gone. In this respect the authorities are looking for the ways to make the borrowing process less stressful.

The goal is to manage the loan repayments and service system in general in such a way that borrowers could be able to make repayments timely and easier and to make loans more affordable in all senses. The bureau also seeks ways to limit the operation freedom of payday lenders in all possible ways.

One of the names that CFPB calls payday lending operations is “abusive collection practices” and it is the reason why the claim that reforms are needed and badly. They also say that the type of repayments payday lenders offer are easy and quick; however, they are fraught with bank overdrafts and late fees and other issues that make people even more indebted than they have been before.

However, payday lenders have got a different point of view on these things. They say that the high rates of the loans come from their short term nature and that it is clear that such loans can’t be cheap in accordance to the rules of the market. However, problems arise when people renew loans and do it continually; this is where long lasting obligations come into play.

Payday lenders are in demand and due to the fact that credit unions as well as banks are unable to meet such short-term needs of borrowers who sometimes have to find small cash and fast; let alone the customers who are unable to apply for a bank loan due to their bad credit. The proponents of payday lending as a service say that total elimination of payday loans won’t be helpful to the low-income individuals, it will actually deprive them of the last financial resort.

Many people in financial industry agree that CFPB don’t need to be too hard on payday lenders. Or at the very least they should present a decent and available alternative to such service. At the present moment payday loans are highly in demand despite the fact that they are very highly priced; and if they are to be regulated out of existence, there should be some option that would fill in the niche instead. It is hard to image that banks will partake in this at the present moment.

One of the most interesting ideas that appeared in the process of payday loan discussion is to alternate the way employees are paid. If repayments are made each day, a great deal of cash will reach the workers faster than it I when the payment cycle is each month or a fortnight.  Surely, this is a very alternative measure and not many employers will agree to it; however, this is one of the ideas that CFPB should take into consideration instead of making strict payday loan rules even stricter.