The Consumer Financial Protection Bureau (CFPB) 1 headed by a new director Kathy Kraninger suggests new ways of protecting consumers against predatory lending. Previously, they wanted to impose certain limits on Payday and other shert-term lending companies. Now they decided to fight against predatory lenders with the help of a new rule “Lenders can only approve loans that borrowers are able to repay without any re-borrowing”Lauren Saunders, associate director of the National Consumer Law Center (NCLC).
“Payday lenders’ business model works making them profit when borrowers get into an unaffordable debt trap of loans at rates that reach 400% APR or higher.”
The CFPB’s proposal is arbitrary and is likely to face certain challenges the way it happened to the previous Payday Loan law of 2017 which came into force only after more than five years of extensive study, data collection, and public feedback. What about the last it is mostly highly supportive of the reform. More than 2/3 of the Americans vote for the borrower’s creditworthiness check. They think lenders must make sure that the loan is affordable before approving them for cash advance. More than 70% of both Democrats and Republicans supported the Consumer Bureau rule. As a result, Payday loans were prohibited in 16 states and the District of Columbia.
“The majority of borrowers, for example residents of Colorado (last year) and South Dakota (2016), shout for limiting interest rates to 36% or less whenever they get the chance,” Saunders noted.
He also adds that it’s up to the public to inform the CFPB of their desire to restrict the rights of predatory Payday Loan lenders.
The deadline to comment on the CFPB’s proposal to make all the lenders check the borrowers’ ability to pay off the loan on time without rollovers and extensions will be three months after it appears in the Federal Register.
In case you need urgent money but are not sure whether you'll be able to pay off a Payday Loan or short-term lending is illegal in your state you can apply for an Installment Loan or Personal Loan.
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