CFPB Reconsiders Payday Lending Rule, But Is That What Consumers Want?

CFPB Reconsiders Payday Lending Rule, But Is That What Consumers Want?

January 17, 2018         Written By John H. Oldshue

Under new leadership, the Consumer Financial Protection Bureau is reconsidering a payday lending rule designed to prevent consumers from falling into “debt traps.”

The original rule was proposed under the Obama Administration, but it was not finalized until October 2017. The new regulations were set to go into effect this year, but Mick Mulvaney, the bureau’s acting director, plans to reassess the structure of the rule. Mulvaney worked with Congress to undo the rule when it was initially under consideration.

But what do consumers want? After all, the CFPB’s job is explicitly to protect consumer finances. A study from July 2015, shortly after the CFPB’s proposal, showed Americans were overwhelmingly supportive of payday lending restrictions. 75% of survey respondents said payday loans should have more regulations. 78% believed lenders should check a consumer’s ability to repay the loan before issuing the funds, and 75% said the repayment period should cover several months, not two weeks. Typically, payday loans are to be repaid after the recipient’s next paycheck (hence the name).

The bureau says it is reconsidering the rule because it could limit some consumer’s access to emergency or short-term funding, and could cut the industry’s revenue by two-thirds. However, many payday loan recipients get trapped taking out loan after loan just to cover their bills, and the extra money they spend in interest creates a pile of hefty debt. If the CFPB does restructure the payday loan regulations, they will hopefully maintain policies that prevent consumers from over-borrowing.



The information contained within this article was accurate as of January 17, 2018. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.


john-oldshue

About John H. Oldshue

John Oldshue is the creator of LowCards.com. He worked for over 15 years in television and won an Emmy award for his reporting. He covers credit card rate issues for LowCards.com.
View all posts by John H. Oldshue
Featured Low Interest Card
Top Features : 1.25X miles on every purchase; no annual fee; bonus of 20,000 miles once $1,000 is spent in first 3 months
Featured No Annual Fee Card
Top Features : Earn cash back twice. 1% when you buy plus 1% as you pay; 0% APR for 18 months on balance transfers
Featured Bad Credit Card
Top Features : No Annual Fee; Cash Back match at the end of your first year; Social Security Alerts
Featured Fair Credit Card
Top Features : No annual fee; access to higher credit line after making first 5 monthly payments on time
Featured Limited/No Credit
Top Features : No annual fee; reports to major credit bureaus; access to higher credit line after making first 5 monthly payments on time
Featured Cash Back Card
Top Features : No Annual Fee, Bonus Offer, Cash Back