Consumer Bureau rolls back on payday lending rule

Consumer Bureau rolls back on payday lending rule
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The Consumer Protection Bureau rolls back on payday loan regulation, announcing on Wednesday that it plans to nix part of a proposed rule that would require lenders to determine a customer’s ability to pay back a loan before it was issued.

The Obama administration decided to target pay-day loans with a rule that would limit lenders to only two withdraw attempts from a borrower’s account.

It would also require lenders to determine a customer’s ability to pay back a loan before one was issued.

The Bureau decided to remove the latter part of the rule earlier this week, but some still believe there should be some sort of regulation in place.

“One of the main ways to make sure paychecks go farther is to make sure working families don’t get ripped off,” said Barack Obama in 2015.

Words from a former president who aimed to crack down on predatory loans, a trap millions of Americans can fall into.

“It’s easy to go get a payday loan. Nobody knows you did it. You don’t have to run around and ask and talk and explain your story as to why you need it,” said Kerri Still who admits to using payday loans in the past.

Still runs her own business now, but says that as a single mom, she took out pay-day loans more than once.

“It’s been a situation where there’s been no other options, but again, when you don’t have the extra resources and you need some extra cash and you need it now,” Still explained.

it’s a mindset former loan shark Donny Pennington would prey on before he decided to quit the business. He admits many of his former customers were just trying to make ends meet.

“They’re living paycheck to paycheck, so they can’t afford any extra expenses and that’s what happens with payday loans, and they just continue to get deeper and deeper into it,” explained Pennington who is now a teacher of business and personal finance.

It’s a national problem with as many as 80% of payday loans rolled over into another within just two weeks, something Pennington witnessed firsthand.

“They would have loans with four or five different finance companies, and they’re robbing Peter to pay Paul with different finance companies. If we could regulate the interest where they’re not being charged 300% or 400% on a small loan, then maybe that would help our society,” reasoned Pennington.

“Once you get into a cycle, if it’s every pay day, your money is really not going to the best place,” said Still.

The Bureau plans to delay the rest of the rule, which would limit how many times lenders could withdraw from a borrower’s account, until 2020.

The agency’s chief, Kathy Kraninger, says pulling back the regulation will encourage competition and help improve credit options for borrowers in need.