Feds Want New Restrictions on Payday Loans
The Consumer Financial Protection Bureau proposed new rules on Thursday designed to end what it calls "payday debt traps" by requiring lenders to make sure a borrower can repay that loan before approving it.
The new rules would cover a variety of small-dollar loans marketed to financially vulnerable consumers, such as payday loans, auto title loans (where the vehicle is used as collateral), high-cost installment and open-ended loans.
CFPB director Richard Cordray acknowledged that people who live from paycheck to paycheck may need a loan to cover unexpected expenses or a drop in income, but he said the credit products marketed to these consumers should help them, not hurt them.
"Too many borrowers seeking a short-term cash fix are saddled with loans they cannot afford and sink into long-term debt," Cordray said in a statement. "It's much like getting into a taxi just to ride across town and finding yourself stuck in a ruinously expensive cross-country journey. By putting in place mainstream, common-sense lending standards, our proposal would prevent lenders from succeeding by setting up borrowers to fail."
Reader Comments