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Taking Measures to Protect Borrowers Looking for Short-term Lending Solutions

Payday Loan

The Consumer Financial Protection Bureau (CFPB) recently announced that it was looking forward to propose certain rules which could put an end to the payday loan you can trust debt traps by making it compulsory among the lenders to ensure that the borrowers can pay back their loan balances on time. The entire payday loan industry is a big one and these loans form the last-minute saviour of those people who fall short of their savings in the middle of the month and need instant cash. The urgency and convenience of such loans has made them a popular option but at the same time there has been too many traps to squeeze out money from the pockets of the vulnerable borrowers.

The new proposals would restrict the lenders from collecting payments from the bank accounts of the consumers in those ways which tend to accrue late fees and penalty charges. Such strong protections for consumers will be soon applicable on vehicle title loans, payday loans, deposit advance loan programs and some other high cost installment loans.

The 2 different approaches towards eliminating the debt traps

The proposals which are under consideration offer 2 different approaches to getting rid of the debt traps, prevention of the traps and protection from the traps.

#1.  Prevention of debt trap requirements:

This option would let go of the different debt traps by requiring the lender to make sure at the beginning whether or not the borrower can pay back the loan when it is due, including the principal amount, interest rate, and other fees. Lenders would have to abide by a 60 day cooling period in between loans. If they wished to lend a second or a third loan within the 2 month window, they had to take a close look at the financial situation of the borrower.

 #2. Protection of debt traps requirements:

These requirements would get rid of the debt traps by allowing the lenders to offer the borrows affordable alternative options for repayment by limiting the total number of cash loans which a person can take out consecutively in a row and over the course of an entire year. The Bureau is also thinking of considering the option of decreasing the principal of the loan for easier repayment.

Hence, if you’re into the market to take out payday loans, you need not be scared about your fate as the CFPB has planned all the above proposals for safeguarding your future.

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