By early next year, the Consumer Financial Protection Bureau (CFPB)’s new rules and regulations pertaining to the payday loan industry will likely take into effect. It’s only likely because there is growing opposition in Congress as many representatives want the proposal to be delayed by at least one or two years. But with President Obama finishing his term in a few months, he’ll sign it into law.
With an increasing number of congressional officials combating the CFPB’s federal regulatory framework, many leaders in Washington are taking a stand against the payday loan industry and supporting the CFPB’s mandate. The CFPB announced a number of changes early last month in Kansas City.
One of these is Ohio Democratic Senator Sherrod Brown, who supports anti-poverty organizations, consumer advocacy groups and the CFPB when it comes to financial reforms of “legalized loan sharks.”
Speaking at a press conference on Capitol Hill, Brown stood alongside Americans for Financial Reform American Federation of Teachers, the NAACP, Democracy for America and the Center for American Progress in support of the CFPB’s new provisions for payday loan businesses like Landmark Cash across the United States.
“Americans deserve protection from predatory payday lenders that have trapped many low income families in a vicious cycle of debt,” Brown said in a statement. “But the payday loan industry and its lobbyists will spend millions of dollars to try and roll back these protections.”
Brown added that he encourages consumers to make remarks to the CFPB’s 90-day comment period, which started on June 2.
The senator noted that there should be no loopholes added to the proposed regulations.
In addition to the U.S. senator, AFT president Randi Weingarten acknowledged that low-income consumers need access to other forms of credit, but she urged some common sense to enter into the conversation. She cited the fact that if someone needs to borrow money to pay for an unforeseen expense then it would be very difficult to pay back those funds 14 days later.
Despite the overwhelming endorsements for the CFPB’s 1,300-page rule, some feel that there should be a couple of additions to the initiative. Nick Bourke, director of Pew’s small-dollar loans project, for instance, recommended that the CFPB should insert lower prices, manageable installment payments and quick loan approval in its rules.
At the present time, the CFPB is putting forward a requirement that forces payday lenders to determine that borrowers can really repay the payday loan. The rationale behind the move is to protect consumers from entering a vicious cycle of debt because they were unable to pay back the loan.
CFPB director Richard Cordray has said that the federal consumer watchdog agency will likely announce more rules in the coming months. These additions will probably stem from the comment period.
Critics of the payday loan industry say these alternative financial products often send households into perpetual debt because of exorbitant interest rates and fees. Proponents of this niche argue that low- and middle-income need access to funds that they normally wouldn’t get from traditional modes of credit.
A new study found that personal finance habits of the U.S. population are horrible. It also discovered that black and Hispanic consumers are far more likely to use a payday loan than white and Asian clients.