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Stepping up to the Plate for Small Payday Advance Loan Companies

As the final days wound down for the Obama administration, it was made crystal clear that the former POTUS wanted to effectively nationalize small dollar, short term loans. In fact, Obama clearly intended for this proposed lending nationalization to be a part of his legacy. However, the measures that the former administration took to effect this lending change could cause big problems for payday advance loan providers. Back in June of 2016, the efforts to hamstring small payday advance loan companies began to become clearer. That is when the Consumer Financial Protection Bureau (CFPB) released the Small Dollar Lending Rule. This rule was clearly set up to cause serious problems for payday advance loan companies. It laid out rules that would “clean up” the short term lending industry. This rule forces payday advance loan lenders to put serious efforts into determining if their customers will be able to repay their loans; like these lending companies weren’t already doing so… Most payday advance loan providers have accepted the fact that this rule is going to take effect. However, many lenders in this industry are asking for is that they not be forced to put in more effort to prove the financial fitness of their clients than lenders who provide mortgages, car loans and other large loans do as part of their loan application process. In other words, payday advance loan companies shouldn’t have to put more effort into providing smaller loans that the big loan companies do. Many industry experts believe that if the proposed rule goes through that it will eliminate 60 to 75 percent of payday advance loan locations. In fact, lending companies have indicated that they would walk away from this industry if the proposal goes through as it was originally written. There are already rules in place that stop big banks from dabbling in the short term lending market. Essentially what you have is a scenario where small payday advance loan companies are squeezed out of the industry, while big banks are blocked from offering small dollar loans. This would effectively allow supporters of Obama’s vision to… Read More

The Consumer Financial Protection Bureau Announced New Mortgage Rules

In 2010 the government established the Consumer Financial Protection Bureau. It is this agency’s job to make sure that the consumer is protected as far as financial matters go. They have recently released a new list of mortgage rules that banks must now follow. According to the New York Times, this is to start next January. With these new rules the Consumer Financial Protection Bureau wants to enforce qualified mortgages. This is meant to ensure the borrower can actually afford the loan. It will also protect the lending institution should the borrower default on the loan. The new regulations say that the borrower must have an income and asset combination that is sufficient to pay back the loan. The goal with this is to make sure that before someone gets a loan that they are able to pay for it. If they are not able to pay back the loan, then the borrower will end up in over their head with debt, and no way to pay back the loan. This can really ruin the borrower’s credit score. Another rule is regulating how much the monthly payment can be. The Consumer Financial Protection Bureau is limiting the monthly payment to be no more than forty-three percent of the borrower pre-tax income. This will help the consumer not have such a high payment every month that they cannot afford the other necessities that they need to purchase, or pay other bills that need paid. Upfront fees are to be limited now. No longer can banks charge fee after fee after fee. Now they are limited on what they can charge for fees so that the consumer is not overwhelmed with paying for fees when getting a loan. The Consumer Financial Protection Bureau is also eliminating interest-only payments. These types of payments can leave borrowers in much more debt. When the borrower is only paying on the interest, not the loan itself, they are not paying off the loan at all. Instead all the money goes to the interest, which will just come back as more interest that needs paid. It is… Read More