Payday Loan’s Place in the State and Nation
The times are looking rather dreary for payday loans. Recently, a slew of states have been enacting restrictions and guidelines for payday loan companies to abide by in the hopes to further protect borrowers from the outrageous interest rates that are charged by such lending companies. These restrictions include fee restrictions and percentage rate caps. On a federal level, Senator Dick Durbin has proposed an act that would enforce all payday loan companies to place a 36 percent APR cap on loans and create new interest rate calculations and annualized fees. This could drastically change the future of all payday lending companies around the United States.
The state of Ohio for example has been one of the states who have already placed restraints on Payday lending activities. Ohio has recently enforced legislation to end any type of exploitation loopholes that companies have been using to take advantage of borrowers and enforce more restrict regulations on short term lending. These restrictions have been put in place because payday lending companies have been charging increasingly high and ridiculous rates that reach into the hundreds. States’ legislators have deemed this type of poaching as “predatory” lending, giving such lenders the name “predatory lenders”.
There are many US states that have already outlawed such lending practices. The most recent states to have thrown out payday loans are Arkansas, Oregon and New Hampshire. These states are following the lead of the bill proposed by Senator Durbin. In fact, these states are not the only one’s in favor of eliminating “predatory lenders”. The Obama administration has also shown its support to end the days of Payday lending through President Obama’s “Plan to Strengthen the Economy” when he states that he would “Cap outlandish interest rates on payday loans and improve disclosures” as well as asking reliable and responsible lending institutions to create smaller loans for consumers.
Payday lenders are beginning to feel the pressure of the states and the federal government. In an act to remain relevant to the public and consumers, many lending companies have turned to traditional installment lending. Many of them have also begun to use software to help create an online type of loaning system to lessen the blow of these new rules and regulations that may be hitting payday loan companies.
Of course, none of these laws will probably become retroactive which means that these new laws may come a little too late. They will protect new borrowers but for those who have already been sucked into the cycle of borrowing and debt, there is really little that these laws will do. This will be an interesting case to follow as there are many legislator’s who are fighting very hard to end the days of payday lending creating a bleak place for payday loans in both the state and federal level.
Related Links:
Comments, Questions, Reviews?
Make yourself heard: feel free to drop a few lines below.
You must be logged in to post a comment.
