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Prevent shark attack by avoiding payday loans

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Sharks have a bad reputation.

Do not mistake yourself. It is absolutely tragic every time a swimmer or surfer is bitten or killed.

But sharks only do what comes naturally. They are “top predators”, which means they are at the top of the food chain. When a shark hunts for prey, it’s not personal.

Yet here’s one way Merriam-Webster defines a different kind of shark: “A cunning, rapacious person who takes advantage of others. ”

I see payday lenders in this sense. They see a group of people struggling financially and doing what comes naturally to them. They hunt.

Right now, supporters and opponents of payday loans are clashing, waiting for the Consumer Financial Protection Bureau to release proposed rules affecting these and other short-term borrowings, such as auto title loans. .

The watchdog has said it wants to require payday lenders to make sure borrowers can afford to repay their loans.

This simple mission has the lenders and their supporters, including many members of Congress, in arms. It will crush the industry, they say. Lenders only provide a service that people want and need, they say.

If you don’t know how payday loans work, great for you. It is a financial product from which I advise you to stay away.

These loans are relatively small and are supposed to be repaid on a person’s next paycheck, usually within a few weeks. The loan qualifications are not difficult. You must have a bank account and income. Borrowers can provide lenders with post-dated checks or authorize electronic withdrawal of funds.

Many people see payday loans as a temporary financial solution. Borrowers think they just need a little extra time to get out of this mess.

But often that’s not what happens.

“Payday consumers can go into debt when they can’t afford to pay off their initial loan,” said Jen Howard, CFPB director of communications. “Many take additional loans, pay more fees and interest to end up with the same debt.”

This month, the head of a group of payday lending companies was charged with federal racketeering charges. Authorities charged the Pennsylvania man with violating anti-usury laws, charging more than 700% on payday loans. According to the indictment, he and another accused raked in more than $ 688 million in revenue over five years.

In areas where there are sightings or attacks of sharks, precautions are necessary. This is the case with payday loans.

George Burgess, a biologist at the Florida Museum of Natural History who investigates shark attacks, wrote a blog post providing a number of tips for reducing the chances of being a victim of a shark attack in water. I adopted them to fit this payday loan debate.

Always swim in a group. Sharks most often attack single individuals, Burgess wrote. We should therefore applaud the CFPB for its efforts to protect a large number of people who may not even know they are in danger.

Avoid water at dawn, dusk or at night. It is in your darkest financial days that you might see a payday loan as a lifeline. But a typical loan payment takes 36% of the borrower’s salary, according to the Pew Charitable Trusts.

Do not enter the water if you are bleeding. Sharks can smell blood. Payday loan is an opportunistic business with a profit model that draws more money from those caught in the cycle of repeated borrowing. Fees, when annualized, can reach three-digit or higher interest rates.

Don’t splash a lot. Payday loans are for people in financial panic. These people are dabbling around in search of relief, but debt can sink them even deeper.

Don’t touch a shark. Avoid payday loans. If you can’t cover an expense now, how will pledging future income that you might need later help you?

In the event of a shark attack, the general rule is “Do whatever it takes to get away!” Pew Research reveals that 12 million Americans take out payday loans each year, paying $ 7 billion in fees.

I have met many payday borrowers. They tell stories of ruthless debt cycles. We must do whatever it takes to protect others from the same gruesome fate. It’s not personal for payday lenders, but it should be for us.

Write Singletary to the Washington Post, 1301 K St. NW, Washington, DC 20071 or [email protected] Comments can be used in a future column, with the author’s name, unless requested otherwise. To find out more, visit http://wapo.st/michelle-singletary.


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Arlington first in Tarrant to regulate payday loans and auto titles

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Agreeing that this may not be a perfect ordinance, but it’s a good first step, city council on Tuesday night approved restrictions on how payday lenders and auto lenders can to do business.

Arlington is the first city in Tarrant County to regulate the business practices of lenders.

The council proceeded to its final 9-0 vote the week after hearing from seven speakers, including lay leaders and the pastor of St. Joseph’s Catholic Church, who described how high the interest and fees charged by these Lenders have severely harmed people by causing them to lose their cars, file for bankruptcy and feel ashamed.

“It’s like walking in a spider’s web,” said Rozanne Veeser, president of the Fort Worth Diocesan Council of the Society of Saint Vincent de Paul. “You just don’t know how hard it is to pay it back. “

After the vote, approximately 100 members of Arlington churches, community groups, nonprofits, and a volunteer task force from the Office of State Representative Chris Turner, D-Grand Priarie, organized by the North Texas Industrial Area Foundation, gathered in front of City Hall to thank the Council.

Rev. Daniel Kelley, pastor of St. Joseph, commended the council for “standing up for our constituents by being the first town in Tarrant County to pass a payday loan ordinance.”

“This is not the end. This is only the beginning,” Kelley said. “We can now work together as a stronger community to do greater things to help our citizens.”

Two industry representatives urged the council to postpone the vote for 30 days, saying the ordinance could be improved.

The ordinance goes into effect Jan. 1, although Mayor Pro Tem Sheri Capehart has suggested that the schedule be brought forward in hopes of reducing the number of residents taking out such loans for holiday purchases.

Among the restrictions: limit payday loans to 20% of a borrower’s gross monthly income and auto title loans to 3% of the borrower’s gross annual income or 70% of the vehicle’s retail value.

Business practices regulations for so-called credit access companies are based on the rules of the Texas Municipal League. prescription model, which 27 other cities have adopted. Fort Worth remains the largest city in Texas not to have one.

These lenders have come to the attention of consumer groups, who accuse the industry of predatory practices that can lead to an increasingly deep cycle of capital, interest and penalties. Supporters in the industry argue that lenders serve clients who could not get loans elsewhere due to their income level or credit history.

Councilors Jimmy Bennett and Robert Rivera stressed that while the ordinance can help, individual financial education and empowerment are also essential tools.

“Collectively, we the people of Arlington need to be involved in this,” Rivera said at last week’s meeting, challenging those who spoke in favor of the ordinance to remain active in the effort. .

Other provisions of the ordinance include:

Limit the repayment terms to four installments each covering 25% of the principal.

Prohibit the renewal or refinancing of installment loans.

Make documents available in Spanish and Vietnamese as well as English.

Businesses must register with the city, keep loan records for at least three years, and provide clients with a list of nonprofit credit counseling agencies.

Zoning regulations on where these businesses can operate in the city are unfolding on a different track that goes first through the Planning and Zoning Commission, said Jennifer Wichmann, director of the management resources department of the city. city, which ran the ordinance until approval.

Editor-in-chief Robert Cadwallader contributed to this report.


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American bank offers payday loans and is criticized by critics

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Loan application form

For years, consumer advocates have decried payday loans as an expensive way to borrow and a way that keeps people trapped in a cycle of high interest debt. The howls of protest might get louder now that a major bank has offered a similar product.

US Bank, the fifth national bank, lends up to $ 1,000 to cash-strapped consumers through its simple loan program. The company has branches in 25 states, including Arizona, where it ranks ninth in statewide deposits with $ 2.2 billion.

The annualized interest rate on this new loan could reach almost 71% or even more. This puts them above the ceiling for small dollar loans in Arizona and many other states, critics say.

Various consumer groups are concerned that a major bank has unveiled a short-term, high-cost loan like this. But given the number of Americans struggling to make ends meet, the product could prove popular.

A study by the U.S. Federal Reserve this year found that about 40% of Americans said they would struggle to cover a surprise expense of $ 400. A Bankrate.com survey estimated that 23 percent of adults have no emergency savings.

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Americans depend on $ 90 billion in short-term loans and small dollars each year, according to the Office of the Comptroller of the Currency or OCC, a banking regulator.

“We have worked very diligently to ensure that this is a very accessible product for our customers while helping them position themselves on the path to success,” said Molly Snyder, spokesperson for the US bank, in response. via email to a question on how the bank will assess whether specific borrowers could afford to repay these loans.

While the new loans will come with steep costs, ranging from $ 12 to $ 15 for every $ 100 borrowed, this alternative could help people avoid more serious issues, such as disruption of utilities or eviction from a flat.

“We saw this as a need that we could help with, providing clients with a reliable and transparent loan option,” said Lynn Heitman, executive vice president of the US bank, in a prepared statement.

How they work

Prospective clients must first open a checking account with a U.S. bank for at least six months, with more than three months of recurring deposits such as paychecks or Social Security benefits.

They could then borrow between $ 100 and $ 1,000 in increments of $ 100, with repayment spread over three months in three fixed installments.

The cost would be $ 12 for every $ 100 borrowed if repayments are made by direct debit from the checking account. Otherwise, it would be $ 15 per $ 100 loan.

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So if you borrow $ 400 and agree to make automatic repayments, the fee would be $ 48. You would pay off the $ 448 in three installments of about $ 149 each. The annualized interest rate or APR would be almost 71%.

With this loan, there are no late fees, non-payment fees, prepayment penalties, or other hidden charges, the U.S. bank said. Credit applications must be made online, via the bank’s mobile application.

Quick analysis, financing

Before lending anything, the US bank extracts a customer’s credit report and analyzes their ability to pay. If approved, the whole process, including transferring funds to the checking account, can be completed in “a matter of minutes,” Snyder said.

After testing the product in 2016 and 2017, the company said reviews indicated that consumers appreciated a simple pricing structure and immediate access to funds (after establishing a checking account).

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Many respondents also said they liked loan details to be reported to rating agencies, allowing clients to build up a credit history, although this can backfire on those who cannot repay on time.

To minimize the risk of people becoming addicted to short-term loans – a review of payday loans – the US bank allows customers to have only one simple loan outstanding at a time.

After refunding the money, a customer must wait 30 days before looking for another.

More flexible regulations and dissatisfied critics

The US bank unveiled its simple loan after the OCC issued guidelines in May for short-term installment loans. He encouraged banks to make such loans on condition that they are reasonably priced and affordable, without defining what it means.

With such loans, banks “can help consumers adopt more mainstream financial products without trapping them in debt cycles,” the agency said.

Reviewers, including the Center for Responsible Lending, don’t see loans as user-friendly.

“This type of product is not a safe alternative to a payday loan,” Rebecca Borne, the group’s senior policy adviser, said in a statement.

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The organization considers an APR of 36% to be a reasonable dividing line between affordable short-term loans and unacceptable loans. Some payday loans have APRs well over 100%.

The existing interest rate caps in most states “would make this simple loan product illegal if made by a non-bank lender,” Borne added.

(Arizona is among the majority of states with rate caps on small loans. The limit shown for Arizona is 36%, although loan fees can increase the APR to 54%, according to a 2015 study from the National Consumer Law Center. The law allowing payday loans, potentially with much higher rates, lapsed almost ten years ago.)

Debt cycle underway

Cash strapped borrowers look for high cost loans after struggling to make ends meet. In many cases, these struggles are exacerbated by little or no health insurance, unaffordable housing, job instability and low incomes, the Center for Responsible Lending said in a report this year.

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But even after people received a payday loan, “the fundamental problem – insufficient income relative to expenses – remained,” the group said.

Critics argue that borrowers may find it difficult to exit a cycle of short-term, high-interest loans. An analysis of payday loans by the Federal Bureau of Consumer Financial Protection found that borrowers on average accepted 14 cash advances over a 12-month period, highlighting what can become a continuing spiral of debt trap .

Impact of high cost loans

In 2013, a half-dozen banks began providing high-cost “deposit advance” loans, similar to payday loans, but subsequent guidance from regulators, including the OCC, prompted lenders to suspend their programs.

During that brief period, the loans “drained about half a billion dollars from bank customers each year,” the Center for Responsible Lending, the Consumer Federation of America, the NAACP and five other groups wrote in a letter. to banking regulators.

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These loans, they said, have triggered overdraft fees and charges for insufficient funds, as well as other harm to consumers, ranging from difficulty paying bills to bankruptcy.

Short-term loans offered by banks and credit unions also won’t bankrupt more expensive payday lenders, consumer groups have predicted. Rather, they called government interest rate limits “the most effective measure against predatory lending.”

Critics today fear a new wave of low-cost, high-cost bank loans.

Contact the reporter at [email protected] or 602-444-8616. Are you struggling to make payments on low cost, high cost loans? Fill in this form if you want to tell us about it.

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Eviscerating payday loan rules will hurt vulnerable families

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Proposed plans to get rid of rules designed to protect largely low-income consumers from predatory high-interest loans risk the well-being of some of America’s most vulnerable households.

The U.S. Consumer Financial Protection Bureau recently announced a proposal to repeal rules that would have meant payday lenders and auto title lenders had to ensure customers could repay loans under contract terms. Loans not meeting this requirement would be considered unfair and abusive.

When people get trapped in abusive loan deals, they can get stuck sacrifice their well-being and that of their families in order to make refunds. This rule would have prevented people from getting trapped by these types of predatory payday loans and auto securities.

Many payday lenders exploit cash-strapped people, often with limited access to other forms of credit, by offering them small, short-term, high-interest loans. Some borrowers have reported paying triple-digit interest rates, in some states more than 600 percent, on their payday loans.

Payments then skyrocket and people struggle to keep up, forcing some to choose between their loans and their basic needs. Research has shown that payday loans disproportionately affect Afro-American, latino, and poor communities.

The Consumer Financial Protection Bureau payday lender rules, finalized in 2017, created a national standard and safety measures to prevent this predatory interest rate trap for payday loans and auto title loans, while providing access to small dollar loans. The rule was created after a long public comment period, with the participation of payday lenders and the public.

Since the final rule was announced, industry lobbies have been pushing for a backtrack, saying the rules would limit low-income communities’ access to much-needed credit. The answer to limited access to credit is not to allow more loans with exorbitant interest rates and unrealistic terms that ultimately leaves borrowers worse off. Instead, the Consumer Finance Protection Bureau should focus its efforts on preventing abuse and empowering low-income communities to access fair credit with reasonable interest rates.

Removing the very rules that protect vulnerable people does nothing to help communities in need or advance consumer protection.

New rules aim to tackle payday loan abuse

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Dan Kitwood | Getty Images

The government’s consumer watchdog cracked down on payday loans.

The Consumer Financial Protection Bureau announced Thursday that it has finalized the rules targeting the payday lending industry. The rates on these short-term loans can the top 390%, and troubled borrowers often re-borrow, accumulate fees and interest.

This combination can create a debt trap that is difficult to escape, advocates say.

“Too often borrowers who need cash quickly find themselves trapped in loans they cannot afford,” CFPB director Richard Cordray said in the announcement. “The common sense protections of the repayment capacity rule prevent lenders from succeeding by causing borrowers to fail.”

It is always important for people to think of any other possible alternative to avoid having to turn to a financial product that is the most expensive, and often the most difficult to repay.

Bruce mcclary

National Foundation for Credit Counseling

Under the rule, lenders will have to perform an initial “payment in full” test to determine if borrowers will be able to repay the loan without compromising other financial obligations. Other protections include access to alternative loans for borrowers who do not meet these requirements.

The CFPB rules are the first national regulation for the payday lending industry.

“There is a lot of variation from state to state,” said Bruce McClary, spokesperson for the National Foundation for Credit Counseling. “Any step towards consistency is a victory for consumers, so people know what to expect, no matter where they live. “

However, the future of the measure is uncertain. Reuters last month reported that industry lobbyists and Republican lawmakers were “bracing for battle” against regulation. There is also legislation at stake which restrict the regulatory power of the CFPB and cancel other consumer protections it is already finalized.

Consumer advocates have hailed the payday loan rule as a good first step, with more need.

“The rule is an important first step and will benefit some consumers who need the help the most, but a lot of work is still needed to ensure that American families are no longer trapped in the debt of bad loans at high interest, ”Michael Best, director of outreach at the Consumer Federation of America, said in a statement.

Although the proposed rules included longer-term payday loans, the CFPB is still studying this market and did not include it in the final rule, said Lauren Saunders, associate director of the National Consumer Law Center.

“Payday lenders are turning to long-term payday loans which are an even deeper and longer debt trap than short-term loans, so the CFPB must act quickly to combat these predatory loans,” he said. she said in an email.

Even with the new protections, payday loans should still be “Loans as a last resort”, McClary said.

“It is always important that people think about any other possible alternative to avoid having to turn to a financial product that is the most expensive, and often the most difficult to repay,” he said.

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Payday loans: 4 things to know

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Payday loans: 4 things to know

A payday loan provides quick access to cash but the cost can be prohibitive. (iStock)

For millions of Americans living paycheck to paycheck, an unexpected expense can be difficult to manage.

Payday ready – small, short-term loans designed to help you until your next paycheck arrives – may seem like the answer. These loans generally a no credit check payday loans and provide quick access to cash. But convenience can come at a very high price.

What is a payday loan?

A payday loan is a short-term loan that you have to pay off within a few weeks of borrowing. Loans may be available from online lenders, through payday loan applications, or from local lenders, although some states prohibit these types. The amount you can borrow is also usually limited by state law, with many states setting a limit of $ 500.

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Payday loans look attractive because they often offer same day financing regardless of your credit rating. As long as you can meet certain minimum requirements, such as proof of income and an active bank account, you can get a payday loan.

How Does a Payday Loan Work?

Unlike many loans, you don’t make payments over time with a payday loan. Instead, the entire amount borrowed – plus fees – must be repaid as a lump sum payment. Often times, you need to write a post-dated check for the amount owed or provide authorization to withdraw the money directly from your bank account.

The fees are often very high, although many states keep the costs down. Fees are often capped between $ 10 and $ 30 per $ 100 borrowed. It is significantly above average APR credit card of 15.10 percent reported by the Federal Reserve in 2019.

What are the risks ?

Because the fees are so high and the repayment terms so short, many borrowers cannot repay payday loans when they fall due and have to take out a second loan, resulting in additional fees. the Consumer Financial Protection Bureau (CPFB) found that more than four in five payday loans were renewed in the same month. And regulations aimed at preventing this type of re-borrowing are being dismantled.

Banking relationships are affected when borrowers cannot repay loans because lenders cash post-dated checks or withdraw funds from bank accounts with insufficient funds. Half of all payday loan borrowers had to pay bank charges for overdrafts or returned checks within 18 months, resulting in an average fee of $ 185. More than a third have actually seen their accounts closed, according to the CFPB. This makes future financial transactions, such as paying bills or cashing a paycheck, much more difficult and expensive.

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The high costs of payday loans also increase the risk of default, which means borrowers simply don’t pay back their loans. One in five borrowers who have taken out payday loans multiple times end up defaulting and are often subjected to aggressive collection efforts.

What are the alternatives ?

Some payday loan alternatives, like auto title loans, can be even more damaging than payday loans. These require borrowers to use their vehicle as collateral to secure a short-term loan similar to a payday loan. The lender can take the car if the borrower cannot repay what he owes.

But there are also other more affordable options that may be available depending on your situation.

If you’ve been a member of a credit union for at least a month, you may be eligible for an alternative payday loan. These offer timely approval, are easy to obtain, and allow you to borrow between $ 200 and $ 1,000 which you can pay back over one to six months. Credit unions can only charge loan processing fees, with a maximum fee of $ 20.

Or, if you are borrowing from friends, family, or employer, you may be able to avoid loan fees altogether, although company policy and state laws vary regarding availability. and the costs of payday advances. And if you have access to a credit card, making a purchase or making a cash advance to access funds could be cheaper than a payday loan although interest charges can still be high, especially for cash advances.

Ultimately, the best option to avoid a payday loan is to save an emergency fund with several months of living expenses so that you can cover unforeseen costs without borrowing. While this takes time, it ensures that high fees and interest don’t add to your financial problems when unexpected expenses inevitably arise.

Payday lender installment loans evade laws and perpetuate predatory attacks on consumers

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Installment loans seem to be a softer, softer version of their “predatory” cousin, the payday loan. But for consumers, they can be even more harmful.

The use of installment loans, in which a consumer borrows a lump sum and pays back principal and interest in a series of regular payments, has increased significantly since 2013, as regulators began to curb payday lending. In fact, payday lenders seem to have developed installment loans primarily to escape this heightened scrutiny.

A closer look at the differences between the two types of loans shows why we think the growth of installment loans is of concern – and requires the same regulatory attention as payday loans.

Possible advantages

At first glance, it seems that installment loans might be less harmful than payday loans. They tend to be bigger, can be repaid over longer periods of time, and generally have lower annualized interest rates – all potentially good things.

While payday loans are generally around US $ 350, installment loans tend to be between $ 500 and $ 2,000. The ability to borrow more can benefit consumers with greater short-term needs. Since installment loans are repaid in bi-weekly or monthly installments over a period of six to nine months, lenders say consumers are better able to handle the financial pressure that brought them to their storefront in the first place. .

Payday loans, on the other hand, typically require a lump sum payment for interest and principal on the borrower’s very next payment date, often within a few days. Lenders offer cash in exchange for a post-dated check drawn on the borrower’s checking account for the amount borrowed and “fees” – what they often call “interest” to get around the rules of usury.

Finally, and perhaps most importantly, installment loans are often less expensive than payday loans, with annualized interest rates of around 120% in some states, compared to the typical range of payday loans from 400% to 500%.

Harmful to consumers

Unfortunately, some of the structural features that seem beneficial can actually be detrimental to consumers – and make them even worse than payday loans. For example, the longer repayment period keeps borrowers in debt longer and requires sustained discipline to make repayments, which can increase stress and the possibility of error. And the fact that the loan amounts are larger can work both ways.

It is true that the small amount of payday loans is often not enough to cover the immediate needs of a borrower. About 80% of payday borrowers do not repay their loan in full when due, but “renew” their loan in a subsequent paycheck. Renewing a loan allows borrowers to pay only interest and then extend the loan in exchange for another payroll cycle to pay off at the cost of another interest payment.

In a recent study, we explored the effect of larger installment loans on borrowers. We used a dataset with thousands of installment loan records in which some borrowers received a larger loan because they were earning more income. Although similar in terms of factors such as credit risk and income level, slightly higher income borrowers were offered a loan of $ 900, while others were given only $ 600.

We found that borrowers with these larger loans were more likely to subsequently incur debt on other installment loans, in-store and online payday loans, and auto title loans. Our results suggest that the higher initial installment loan may not serve its primary purpose of helping borrowers manage their finances and may in fact have caused increased financial pressure.

Abuse and abuse

As some of our previous research has shown, even payday loans, with their annualized rates and very high lump sum payments, can be beneficial to consumers in some cases. Installment loans are no different. When used with care, they can help low-income consumers with no other credit access smooth consumption. And when they are repaid on time, loans can certainly provide a net benefit.

But their nature means that they are also subject to abuse and abuse. And any negative effects will apply to a larger group of consumers, as they are considered more “generalist” than payday loans. Lenders target consumers with higher credit scores and incomes than “fringe” borrowers who tend to use payday loans.

Installment loans represent an increasingly important part of the alternative credit sector. If the regulatory crackdown on payday loans continues, installment loans are likely to become the bulk of loans in the low-interest, high-interest loan market. Given the current lack of regulation of these types of loans, we hope they will receive further consideration.

Biden’s plans for payday loans and crypto take shape | Payments Source

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With Joe Biden returning to the White House to become the 46th President of the United States, his financial regulation agenda is already advancing, depending on who he has chosen to fill key roles.

Biden’s appointments of Rohit Chopra as head of the Consumer Financial Protection Bureau and Gary Gensler as head of the Securities and Exchange Commission put two consumer advocates at the forefront of reversing deregulation of incumbent President Donald Trump while strengthening oversight cryptocurrency and payday loans.

Chopra, a commissioner at the Federal Trade Commission, was previously deputy director of the CFPB and helped found the office defended by Senator Elizabeth Warren, D-Mass. Biden also appointed Gensler, the former chairman of the Commodity Futures Trading Commission. , to be chairman of the SEC. Both Chopra and Gensler have careers in government that tie them to the Obama-era reforms and regulations that followed the 2008 banking crisis.

As Warren’s ally, Chopra will face one of Biden’s most controversial cabinet confirmation hearings, but Democratic victories in Georgia’s runoff are making her way to the top CFPB position easier. Additionally, Chopra has already been confirmed to his current position at the FTC and may serve on the CFPB on an interim basis.

More financial services regulation is certain to come in the wake of the 2020 election, but the ease of confirmation hearings will go a long way in determining just how aggressive the Biden administration can be.

CFPB was heavily deregulated during the Trump years, with the Republican administration getting a key short Supreme victory giving the White House more control over the management of the CFPB. The Trump administration has also backed down payday loan regulations designed to prevent borrowers from taking on debt they could not pay.

Write for Payments SourceChristopher Peterson, director of financial services for the Consumer Federation of America, argued that the reversal of payday loans was damaging consumers, calling for interest rate cuts.

In addition, companies that offer early access to salary became popular during the pandemic and subsequent financial crisis, and respond to many of the same financial strains among consumers that often lead to payday lenders, offering a potential alternative to payday loans. Capital risk has flocked to early access payroll companies in anticipation of the trend continuing.

Chopra will likely push for reinstating the Obama-era rules for payday lending, while the CFPB will retain its centralized leadership structure rather than the decentralized structure Republicans prefer. Chopra, who was a member of the Consumer Federation of America, will likely focus on many of that association’s priorities, said Eric Grover, director of Intrepid Ventures.

Payday loans and subprime consumer credit are still high on activists’ wish lists,” Grover said, adding that there may also be a more in-depth look at crypto-related projects. currency like Diem, the Facebook-affiliated stablecoin project formerly known as Libra. Libra has long been subjected to the regulatory heat of liberals and conservatives around the world.

Crypto under surveillance

Acting as FTC Commissioner, Chopra joined UK Information Commissioner Elizabeth Denham, the EU’s Data Protection Supervisor and other international regulators in 2019 in calling for a close scrutiny of Libra. . Gensler’s appointment as head of the SEC could be bad news for Ripple, as Gensler in the past has said that initial coin offerings should be regulated like securities, a position that puts the SEC at odds with Ripple’s position that XRP is a utility. Gensler has also worked on cryptocurrency technology at MIT and is a proponent of strict cryptocurrency regulation.

“In the past, the CFPB has warned about the risks of cryptocurrencies,” Grover said. “If they become more common, if Diem goes for it, expect the CFPB to do more.”

A push to cut payday loans could open up opportunities for fintechs that offer payroll flexibility without creating the compound flow of payday loans. Blockchain and AI services have emerged in recent years using faster payment processing and lower cost alternative underwriting to short-term credit for issuers.

Chopra’s other top priorities will likely include restoring the fair loan unit and increased enforcement. Notice of proposed regulations will also likely come for open banking, signaling more rules for data aggregators like Plaid. Visa recently canceled its offer of acquire Plaid, in part because of regulatory oversight, according to Benjamin Saul, Washington banking partner at Bryan Cave Leighton Paisner.

“The focus will be on consumer ownership of data as well as third party access to banking information when approved by consumers,” Saul said, adding that the CFPB will likely continue its programs to encourage payments and fintech innovation, such as the trial disclosure sandbox. “However, the success of fintechs pursuing these avenues will depend much more on the bureau’s assessment of the net benefit to consumers of a given product or service.”

Payday loan limits can reduce abuse but leave some borrowers looking

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A sweep study Payday loan bans, expected to be published soon in The Journal of Law and Economics, found similar trends in other states. When short-term loans disappear, it is no longer the need that demands them; many customers simply turn to other expensive forms of credit like pawn shops, or pay late fees on overdue bills, the study’s authors concluded.

Mr. Munn, who works as an oil well site geologist, first borrowed from Advance America eight months ago when his car broke down. He had saved some money, but it needed a few hundred more to pay the $ 1,200 repair bill. Then his employer, react to falling oil prices, cut wages by 30 percent. Mr. Munn has become a regular at the loan store.

He loves the neighborhood vibe of the store and the friendly staff, and he views payday loans as a way to avoid debt traps he finds more insidious.

“I don’t like credit cards,” said Munn, who is wary of high balances they make too easy to accumulate. “I could borrow from my IRA, but the penalties are huge.”

At Advance America, he said, “I come here, I pay back what I took and I get a little more for the rent and the bills. I keep the funds to an extent that I can repay with the next check. I don’t want to have more problems or debts.

Advance America, which is headquartered in Spartanburg, SC, operates offices in 29 states, including 220 in Ohio. The company is studying the proposed rules and says it is not yet sure what changes it would make to comply with them.

According to Richard P. Hackett, former deputy director of the Consumer Financial Protection Bureau, the rules would drastically change and, in some places, eliminate payday borrowing in the 36 states where lenders still operate. He left the agency three years ago and now works privately on policy research, much of it sponsored by industry companies.

Max Credit Cards Don’t Stop Man From Accessing Thousands Of Payday Loans, Survey Finds

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No more than six credit cards have proven to be no obstacle for a man who has accessed thousands of payday loans, a Senate investigation said in recently released documents.

The survey, launched last October, has heard dozens of payday lending horror stories, with the federal regulator’s submission saying the practice presents “a risk of a debt spiral” in more than half of its client records reviewed.

The New South Wales organization, Financial Counseling, Hunter Valley made a submission that referred to several case studies of people bitten by payday lenders.

Service manager Maria Hatch said in one case that a man – called AB – had an average working income, was married and with one child, had six regulated credit cards with no credit available.

At that time, he had access to payday loans.

“He applied for a payday loan and got a loan of $ 3,000, then he applied for and got three more payday loans of $ 3,000 each, then he applied for another payday loan and got a loan from. $ 800, ”Ms. Hatch said.

Ms Hatch said without the help of her department the man would have lost his wife, child and job.

She said another client who was fleeing domestic violence had obtained nearly $ 15,000 in payday loans.

“She got a $ 6,000 payday loan for a car assigned to her,” Ms. Hatch said.

“She already had another $ 8,500 payday loan for a car that was written off in an accident by her ex-spouse.”

Expensive short-term loans

The Department of Social Services reported that the withdrawal of financial institutions from short-term loans has fueled the market for small loans.(

AP Images: Anthony Devlin

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The federal regulator, the Australian Securities and Investments Commission, defines a payday loan as a high-cost, short-term loan.

The commission said they included small loans of up to $ 2,000 that have to be repaid between 16 days and 1 year, as well as loans borrowed over longer periods.

The Senate survey examines the impact on individuals, communities and the broader financial system of the operations of payday lenders and leasing providers.

There is also an emphasis on unlicensed financial service providers, including “buy now, pay later” providers and short-term credit providers.

The Federal Department of Social Services used its submission to the inquiry to acknowledge concerns about payday loans.

“Over the past two decades, financial institutions have increasingly withdrawn financial products and services from low-income people or others at risk of financial hardship due to the high cost of providing these services.” , the department said.

“This has resulted in a shortage of appropriate and affordable small loans for vulnerable people, resulting in increased financial exclusion for people who cannot access traditional financial services.

Salvos alarmed by surge in payday loans

The Salvation Army told the inquiry that the effects of payday loans on families could be disastrous.

“The Salvation Army regularly sees people who are marginalized and vulnerable with this type of debt,” he said.

“The proportion of community members who come to our services with payday loans or consumer leases has grown steadily over the years, more than doubling in size from 6% in 2008/09 to 13% in 2017/18.

“The median values, after adjusting for inflation, have tripled from $ 423 in 2008/09 to $ 1,383 in 2017/18.”

Legal aid wants to act

NSW Legal Aid also filed a complaint, concerned about the exploitation of vulnerable people.

He brought to light the case of a woman he called Rachel.

“Rachel is a young single Aboriginal mother and Centrelink beneficiary from a remote community,” Legal Aid’s brief states.

“She recently left a relationship in which she suffered domestic violence.

Rachel has entered into seven payday loan agreements with the same provider over a 13-month period.

“The loan amounts ranged from $ 300 to $ 1,500,” he said.

“The majority of contracts were concluded the day Rachel finished paying for a previous contract.

“If Rachel had made all the repayments required under each of the contracts, she would have paid over $ 2,500 more than the total loan amount.”

The Australian Securities and Investments Commission used its submission to recognize the need for change:

“We reviewed 288 payday loan files and found that:

  1. 1.In 54.2% of the cases, the consumer had entered into two or more low-value credit contracts (this level of repeated use translating a risk of a spiral of debt); and
  2. 2.In 7.6% of cases, the consumer was in default on another small amount credit agreement. “

Case studies are not always accurate, depending on the credit provider

Robert Bryant, president of the National Credit Providers Association (NCPA), says the case studies provided by financial advisers have distorted the payday lending industry and portrayed the industry in a bad light.

“Of all the non-bank lenders examined as part of the Senate inquiry, only the convenience industry is currently regulated,” said Bryant.

He said some of the information provided to the investigation was incorrect.

“A payday loan is a loan of less than $ 2,000 for a term of between 16 days and 12 months,” said Bryant.

“A payday loan of $ 3,000 and $ 8,500 is not possible.”

The Senate Committee of Inquiry will hold a second public hearing in Brisbane on January 22.

Editor’s Note 1/14/19: The comment from the National Credit Providers Association has been included since this article was first published to provide a balance.