The highly anticipated rules might spur lenders to lobby states to loosen their own laws.
BY LIZ FARMER | SEPTEMBER 27, 2017
Sweeping new federal rules aimed at curbing payday loans are to be released in the coming days. But backers of the crackdown say states need to remain vigilant.
The new rules proposed by the Consumer Finance Protection Bureau are expected to require lenders to verify key information from prospective borrowers, such as their income, borrowing history and whether they can afford the loan payments. The bureau released a draft of the rules last year for comment and is expected to release the final version this month.
Diane Standaert, a payday loan expert for the Center for Responsible Lending, a North Carolina advocate for reform, calls the rule “a significant first step” that recognizes the debt trap the short-term, high-interest loans can create for low-income people.
Payday loans are, as the name suggests, due on the next payday. When that time comes, the lender immediately deducts the loan and costs from the borrower’s paycheck. In many cases, these costs are so high that the borrower can’t cover all his expenses for the next two weeks. So, he turns back to the payday lender for more cash. According to the Center for Responsible Lending, it’s not unusual for a $300 loan to be rolled over multiple times and ultimately cost more than $800 in principal and interest
Read more at http://www.governing.com/topics/finance/gov-new-payday-lending-crack-down-states.html
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