And there is not that legislators and lenders who have opinions about payday loans: consumers who use them have valid thoughts, as well. According to research by the Global Strategy Group survey of companies and Tarrance Group, many borrowers who use payday loans are fine with the way things are now. This brings us to a question that many may not have considered before: whose opinion is more important regarding payday loans - consumers or the responsible government officials use to protect
the federal government is fighting against himself
as anyone who has ever been exposed to any part of the Government can attest, it is rare that there is a complete and total agreement on any issue between parties or individuals. The efforts of the current administration to protect consumers against predatory payday lenders were controlled by members on both sides of the party line. Much of the issue comes down to the CFPB and the amount of energy it carries.
What is the CFPB and what does he do?
Founded in 2010 under the Act Wall Street Reform and Consumer Protection Dodd-Frank, the CFPB is a government office that aims to protect consumers by helping them to create and apply rules for financial markets. He also oversees the companies in this industry, such as banks, credit unions and payday lenders. The proposed reforms of the payday loan industry have been at the top of the priority list of the CFPB and has regularly taken action whenever and wherever he can. However, many of its new proposed regulations are currently under fire by both those who support payday lenders, and those who oppose them. It is important to emphasize that the CFPB has no power to completely prohibit payday loans or regulate interest rates across the board. What it can do is fixed conditions that lenders must meet in order to provide safe consumer loans.
What regulations proposing the CFPB?
Although specific rules are still being developed, the objective will be to ensure that lenders do not offer high-interest loans for people who are unable to make the payments. At present, most candidates borrowers can instantly get a payday loan, and they eventually end up with great interest and fees they can not realistically pay these short as two weeks or 30 days. The CFPB seeks to create a level playing field that holds the responsible lenders and maintains the industry's underwriting standards. Some think that the regulations proposed by the CFPB are not strong enough -. But others think they are too demanding and have legislation created to oppose
Who is against these regulations?
A group of legislators is composed of two Republicans and Democrats is trying to fight against the CFPB with a bill called the Consumer Protection Act and choice, and he gained notoriety because of co-sponsoring Debbie Wasserman Schulz, who is a representative of Florida, and the President of the Democratic national Convention. This would undermine CFPB's efforts to curb predatory lending. Some of the ways that this would include delaying federal requirements in two years, and to allow States to adopt more flexible rules. The main purpose of the bill are not necessarily on the regulation of payday loans, but the desire to limit the power of the CFPB, that supporters of the bill say is too
While on the people who actually use the loans?
While the government, members of the financial industry and nonprofit watchdog groups have much to say about payday loans, it is also relevant to consider the thoughts and the needs of consumers who actually use them. One of the most prominent resources for payday loans on the data in America is the Pew Charitable Trust, which studied this issue for five years. He determined that approximately 12 million people take payday loans every year, and they end up paying more than $ 7 billion in costs. The average borrower pays $ 520 in fees to borrow $ 375, on average costs $ 55 every two weeks to loan services of bricks and mortar. There are 36 states in the US that allow payday loans without strict rules, and the average annual interest rate for the States is a huge 391% .
Who are the people who take these loans? Usually they are low income and are not customers of the ideal bank because of unstable or low incomes. Payday loans and other loan products like small-dollar are often their only option. According to Pew Research, 58% of payday loan customers are struggling to meet their expenses, and most can not afford to pay less for their payday loan 5% or the due date - rather the lump sum payment that is typically required. Since borrowers can rarely afford to pay the lump sum, many take loans or additional rollers on their original loan to cover the costs. This adds more charges and locked up in a loop known as the cycle of pay loan debt; as Pew found, the borrower takes an average of five months to get out of debt once they start using a payday lender.
Payday loans legitimate - and necessary - to those who have no other option
New research by two leading law to vote, a Democrat and a Republican, shows the disparity between those who vote and make decisions about payday loans and those who actually use payday loans. Data compiled by the Global Strategy Group and the Terrance Group determined that the vast majority of borrowers pay surveyed (96%) include the financial burden of loans that they share and consider loans have been helpful. Indeed, 74% of them, there are no other options during a financial crisis - while non-wage borrowers interviewed said they would borrow money to a friend or family member in need of time, 40% of payday loan borrowers said they would use a payday loan.
Many people take for granted the ability to use banks or rely on others, but if every other door is closed, so most people take the only option. It is necessary that legislators and voters consider the financial needs of these decisions will impact more. Some of the concerns regarding the CFPB rage against the industry is linked to concerns that those who use payday loans to get through would if the entire closed area.
Bottom line: the reform is necessary, but it must be done carefully
The question of whether or not payday loans are legitimate is a hard unanswered black and white. Payday loans are legitimate to those who need it, offering credit where it can not be accessed anywhere else, but the industry is clearly problematic and lack of general regulation means national residents some states are more likely than others to get trapped in the debt cycle. Until the regulations proposed by the CFPB are finalized and action is taken, only time will tell what will happen to payday loans and their clients. Want to learn more about personal finance? Follow our blog to stay informed.