The payday loan industry has provided a quick and convenient way for Americans to meet their financial needs when life’s issues arise. However, over the years that convenience has come at a heavy price. According to a study by the Pew Research Center, the average payday loan customer spends an average of $520.00 in fees in order to borrow $375.00. These loans have an average annual percentage rate of around 390 percent. Payday loans are often the last resort for people who need money quickly and have no other way of getting it. Unfortunately, payday loan companies have taken advantage of that.
To combat these numbers and some of the tactics that the payday industry employs, the Consumer Financial Protection Bureau has proposed several new rules. The average payday loan borrower spends nearly half the year in debt. These changes are designed to make it easier for customers to get out of debt after they have received a payday loan.
Here’s what you need to know about the proposed rules changes:
- CFPB is proposing a “full payment” rule: CFPB is proposing that all payday lenders be required to verify that a borrower can afford to repay their loan while paying for basic living expenses and other debt.
- CFPB wants to put an end to “debt traps”: CFPB is proposing a rule that would limit the ability of payday lenders to grant the same loan or similar loans in consecutive months. It also puts restrictions on rolling over loans after they have been repaid or refinancing current loans.
- Notifications when an account is being debited: CFPB proposed that payday lenders be required to give a notification to a customer at least three days prior to debiting their bank account. Many payday loan customers have payments automatically debited. This can be problematic if the customer doesn’t have the money to cover the payment as they typically incur fees from their bank and the payday loan lender.
- Why can’t you get a payday loan from your bank? Experts speculate that larger banks are currently not doing payday loans because of a lack of regulatory standards in the industry. This leaves the industry to companies whose practices don’t typically favor customers.
- How will CFPB determine if their proposals have merit: The proposals are open to public comment from now until September 14th.
Contact the consumer rights attorneys at McIntyre Thanasides Bringgold Elliott Grimaldi & Guito, P.A. today. Their personal approach will help you achieve the results you need. Contact them today at 844-511-4800.