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By: Brando Sencion, Program Coordinator of Santa Cruz Community Ventures
For years consumers have been “set up to fail” by short term lenders with services such as payday loans. Consumer Financial Protection Bureau (CFPB) has been calling for payday lenders to ensure that the borrowers have the ability to repay their loans, according to its terms and limit how much, customers can borrow. Until today, payday lending was regulated by individual states policies. Some states had strict policy and others had no policies at all to protect families from these services. Thousands of store front payday loan services across the country, lend millions of dollars each year to families attempting to make ends meet. The inability of these families to repay the loans, more than often place them in a cycle of debt. Under the new rules issued by the CFPB, payday loans will have to follow a complex set of guidelines to ensure the customer have the ability to repay what they borrowed. The lender is required to verify the borrower’s income and check other financial obligations such as rent, child support, student loans, etc. The short-term loans must be structured to allow the customer to gradually get out of debt. However, a short-term loan under $500, is not required to meet the affordability test. Additionally, the payday loan affordability test does not apply to lenders issuing less than 2,500 loans a year. The newly issued policy is a great leap in the right direction, but there is more to be done. Other recommended policies for payday loans that need to be addressed are placing interest rate caps, limiting loan fees, limiting balloon payments and interest payments schedules.
5 Comments
3/28/2019 04:36:49 am
A wonderful informative post you have shared on this page about the new restrictions for payay lenders but Until today, payday lending was regulated by individual states policies. Some states had strict policy and others had no policies at all to protect families from these services. Thousands of store front payday loan services across the country, lend millions of dollars each year to families attempting to make ends meet. The inability of these families to repay the loans, more than often place them in a cycle of debt. 4/7/2020 10:07:06 pm
I never knew that the payday lenders have a new policy wherein they will have to verify the borrower's income. My bother's vehicle is broken and it needs a repair ASAP, but I still haven't gotten my salary yet. That's why I've been thinking to seek help from a signature loan service. 8/11/2020 03:33:48 pm
Such an informative post! Thank you for sharing. It's good to have legislation in place to protect borrowers. Debt cycles do happen and it is important to be aware of them. But there are things borrowers can do to stay safe. There are some sketchy lenders out there, but working with a state-licensed direct lender can make things safer. Since state-licensed direct lenders are held to higher standards by their state. Often times, they cannot lend thousands of dollars (which is how debt cycles form quickly). State-licensed lenders can usually only lend a couple hundred dollars instead.
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12/22/2021 02:30:17 pm
Una tasa de interés se calcula en porcentajes, es común que se aplique de manera formal mensual o anual. Es decir, que el interés permite que una persona que quiere generar ingresos a partir de sus ahorros, tiene la opción de depositarlos en una cuenta en el banco, con el paso de los meses éste le dará una ganancia mensual calculada en relación con el monto de dinero invertido y el periodo en el cual se comprometa a dejar ese monto en un plazo determinado. Thanks for helping me understand that some states would have a strict policy regarding loans to protect families. I can imagine understanding all the information about getting a direct deposit loan and ensuring that you are protected from this. It will definitely save you from lawsuits, especially when you are actually doing your part on paying for the money you borrowed. Leave a Reply. |
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