The payday loan industry is all set to a major upheaval as the Consumer Financial Protection Bureau; steam-rolled by the Obama Administration has chalked out plans to develop this short-term loan industry. Payday loans which work like cash advances for low and middle income group is of the fastest growing financial industry, making more than $7 billion every year. Payday lenses have been regulated by state agency regulators which the Bureau feels is not so fair and an overseeing by the Federal government can ensure accountability.
The recess appointment of the bureau’s director Richard Cordray by President Obama has put consumers in a speculative mood as well as payday lenders as well as the Republicans. Corday defended the instating of Consumer Financial Protection Bureau stressing that lenders should be made aware that there are real implications of breaking the law.
Payday lenders are already regulated by state laws, they have to abide by federal disclosure laws and licensing requirement, so a federal regulation may just slow down business and cause more problems to the economy. The Republicans have denounced the move as a political stunt by the president and excess regulation is only going to make this financial help that have helped millions in the middle and low-income group populace in the country out of their grasp Payday loan companies insist that they already have some many regulations and the accounts are audited every year. In fact, payday loans are banned in some states or have higher eligibility requirement in some places due to certain or excess regulations.
Payday borrowers fear that they will be put through more requirements and regulations to get loans. Jamie Curtis, a 27 year old man from California says, ‘I did not have good credit, but still I was able to get loan within 48 hours because I needed it to spend on my ailing grandma. I don’t think I would have been able to procure finance as easily.” Briana 47, a home maker says, “I do not know what impact the Federal intervention may cause but I hope it does not throw away some payday lenders out of the market. Good or bad, they have a profit motive but they help us when we need them. I think it is better if the state focuses on throwing the bad lenders out of the business rather than go through all this brouhaha.”
It is better if the Federal government does not intrude much in the processes followed by the state and intervene only when absolutely necessary. In any case, more than 20 million people in the US have found that they have been able to get cash when they need it easily, without having to worry about their credit station or accessibility to funds. It is just that consumers need to be educated properly about payday loans and the high interest rate that they may end up paying in case they are not able to pay money back on time.