If you have read any major newspaper over the past 24 hours you have seen the headline. The government has moved to control lucrative payday lending practices with a rule that brings the 38 billion dollar industry under federal oversight for the first time.
These types of loans are already banned in 15 states where interest rate caps make the business not a viable alternative. Although it is true some of these annualized interest rates, often quite high, are probably not a first choice for most, but they are a necessity for many.
As the Wall Street Journal reports “the rule’s key feature is the full-payment test, a requirement for lenders to run a credit check on customers to assess their ability to repay, using credit-reporting systems registered by the CFPB.” (Consumer Financial Protection Bureau)
Although not too many would advocate a payday loan to anyone as a prudent way to get money on a regular basis; there are those out there, 10-12 million in fact, that really don’t have a choice. For many, these loans are a bridge to the next paycheck and bring food to their table. In a world of rising costs and shrinking paychecks, we wonder how those people will survive.
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