Thursday, June 2, 2016
Payday loans soon to be curbed
The people who use these are often those who can afford it least--low income or people with no bank accounts or access to traditional sources.
The idea is the borrower gets the loan and pays it back with the next paycheck--because this is iffy, the interest rates are sky high.
If it is not repaid the next time, the balance rolls over and the interest rolls on.
One expert said, it's like hailing a cab to get across town and ending up on an expensive cross-country journey.
There is also racketeering and fraud involved. Allegedly, as they say.
Under the proposed changes:
--Lenders would have to determine whether the borrower could pay the loan back in one payment and still meet basic expenses.
--Auto titles could not be taken as collateral.
--There would be limits on how many of these loans people could get in a quick succession.
--If the borrower did have a bank account, the lender could not repeatedly try to debit the payment, running up big bank fees on the borrower.
Comments will come in until Sept 14, when final regulations will be formulated.
Republicans in Congress generally support these loans as a necessity for some people. Democrats want reform, but are fighting over how it should be carried out.