This week, the U.S. House of Representatives will most probably stop the year-long effort by the Consumer Financial Protection Bureau to prevent predetory loans which profit the givers by trapping the borrowers (mostly poor people) in a vicious circle of debt. Today in America, there is a widespread phenomenon in the financial sector controlled by private enterprises that offer fast cash or fast pay short term loans. The payday loans are offered to people who find themselves in financial difficulties before the month ends. The financial services some of which are title loans Austin, TX target individuals who due to unfortunate circumstances find themselves in money problems that forces them to seek for help from a lender The CFPB last June proposed new legislation that for the first time would impose national guidelines on a payday loans industry that fleece the financially vulnerable Americans out of nearly $8 billion yearly. Although the proposed regulations are not harsh in scope because they merely require a titles loan and payday lender to
assess the ability of the borrower to pay, it represents a first step that will prevent predatory loans and rein in the industry’s worst abuses.
The CFPB also enforces existing legislation that stop other predatory practices like pressuring borrowers into debt traps, overcharging borrowers and using illegal tactics for collecting debts. The House bill 3081 which is before the house will completely eliminate the authority of the Bureau to control the industry. It corresponds with the larger provision of the Financial Choices Act which was aimed at destroying the 2010 Dodd-Frank law that came into force to regulate Wall Street in response to the financial crisis in 2008. The CFPB was created by the Dodd-Frank law which gave it the power to protect borrowers from the abusive, deceptive and unfair loans and other services.
Millions of economically vulnerable people fall deeper and deeper into a debt nightmare after taking out online title loans and car title loans to pay for utility bills, rent, food and other basic needs. The intended legislation was to prevent predatory loans from devastating low-income communities further. One of the poorest states in which the CFPB focused on by gathering comments is Alabama where it was discovered that borrowers are charged interest rates of about 300 percent for online title loans and 456 percent for title loans annually.
The industry works in the same way all over because when the borrowers are unable to repay the principal in a one-month or a two-week period, the lenders are willing to roll the loan over into a new one which earns even more interest. Borrowers end up making payments for many months and they end up owing more than they will be able to pay back. On average, the latest figures from Alabama showed that borrowers who took out the loans remained trapped in debt for over 168 days. The industry must clearly be regulated to prevent predatory loans from making vulnerable Americans even poorer.
The cash advances that are given are not just free walk-in- walk-out events because there are tough conditions that one must meet in order to get money. Some lenders will need to verify your credit worthiness by looking into the type of job you have or your FICO credit number and a bank deposit slip.
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