Restrictions Placed On Payday Loans and How the Shockwaves Affect the Industry
It seems like the bad days are upon payday lenders. We all know about the common hate being dished upon this loan. This loan is called out for being high rated, risky, and a one-way ticket to the debt spiral.
Listening to this and many more unfortunate stories of borrowers who broke all barriers of borrowing and ultimately fell into the debt abyss, the Consumer Financial Protection Bureau proposed a set of rules with a number of restrictions for the safety of the borrowers.
Since payday loans are largely a go-to- loan for the low-incomes citizens of America, the set of rules by the CFPB was released with the concern for the poor people. However somewhere amidst this, they forgot to focus on the core issue and ended up affecting the very people they were trying to help.
Following are the highlights of the proposed rules by the CFPB:
- It has become mandatory for the lenders to first inquire about the paying ability of the borrower before issuing the loan.
- Lenders are also required to look into the credit history of the borrower and must fulfill all
- financial obligations.
- The rules also put a limit on the number of loans a person can take.
- The restrictions also involve changes in the repayment mechanism from the lenders.
- The proposal also put a stop at to the automatic withdrawal of money from the borrowers account. According to the proposed rules, the lender will now require a written consent from the borrowers before collecting payment from their accounts.
These rules were not taken happily by the lenders. As they make the point that the main reason and popularity behind payday loans are their ease of access for people at the time of emergencies. The lenders believe that payday loans are flexible and give what the consumers demand; the proposal, however, has just added too many complications in the procedure which will only confuse the borrowers.
People who depend largely on the payday loans until their next paycheck are not the fans of these restrictions weather, but for entirely other reason. They believe that their real issue was the interest rates yet the CFPB has failed to acknowledge the real concern and instead restricted the limit of the loans, so even though they may have become safer to some extent they still have not become cheaper at any cost.
The worst part about these proposed rules is that it has limited the access to the loans which might seem like a safe choice to the CFPB but ask this from a person who needs instant cash to pay hospital bills for a sick person, but he is not granted access to the loan. This poor person has nowhere else to go and he got a sick person to take care of. So the question is, are these restrictions really helping the poor citizens of America or are they the real evil here?