While some people may be surprised to hear that the CFPB has backed off of plans to require payday lenders to research upfront whether borrowers could repay all or most of their loans at once, others are cheering the reversal. A common sense rule should still apply: borrowers should only borrow money they can afford to repay. That rule was a controversial proposal, but the CFPB reversed its decision.
No-cost extended payment plan saves money
A no-cost extended payment plan saves payday lenders a great deal of money. For example, a borrower who takes out a $300 loan would have to pay back $345 over a four-month period if they extend it without penalty. This can easily add up to more than the original principal. In most cases, these loans rollover so many times that the accrued fees are more than the original amount. In March, the Consumer Financial Protection Bureau (CFPB) closed a request for comment on buy now, pay later. In response, 44 public comments were submitted to the CFPB, urging them to enhance transparency and information disclosure requirements.
No- Lån til Oppussing – Søk hos 15 Banker med 1 Søknad! extended payment plans were required by the Consumer Financial Protection Bureau, an agency of the U.S. Department of Treasury. This bureau regulates payday lending. In states that allow payday lending, lenders must offer this option. The CFPB report found that some lenders were deceiving consumers by not revealing their extended repayment options. Fortunately, the new laws will save payday lenders a great deal of money by making it more affordable for borrowers.
CFPB rescinds proposal to require lenders to research upfront if borrowers could afford to repay all or most of their loans at once
In a recent case, the CFPB rescinded a proposal that would have required payday lenders to research upfront whether borrowers could afford to repay all or most their loans at once. The proposal would have required payday lenders to conduct research to ensure that the terms of the loans did not take too much of a borrower’s disposable income.
While this is a positive step for consumers, the CFPB’s proposal to make payday lenders do some upfront research may not help all borrowers, and it could lead to a rise in complaints. Many payday lenders use abusive practices to increase their profits. A recent CFPB lawsuit against Speedy Loan found that their loans violated EFTA rules. The plaintiffs in that case said that Speedy Loan violated the law by allowing borrowers to pay off their loans in full with a preauthorized debit transaction.
Lower-cost installment loans from banks and credit unions
The Consumer Financial Protection Bureau (CFPB) is reviewing consumer loan practices, including higher interest rates, debt traps, and lower-cost installment loans. The new rules seek to make these loans more affordable and make them less likely to leave people without a bank account or car. However, lenders say that their products fill a need in the economy. The agencies are weighing their comments, which are due Sept. 14. They will issue final regulations after evaluating the comments.
The proposed changes have many opponents, including the Community Bankers Association, which has voiced concerns about the new rules. The CFPB has not yet acted on these concerns, so it will take time for banks to evaluate their options. The proposed rule limits the development of a viable program on a large scale. However, many advocates believe the new rules are necessary for consumers to get the assistance they need.