Congress is considering pending legislation (H.R. 4173) which would reform payday lenders and check cashing operations, including putting them under the watch of a new federal consumer protection agency.
One provision included in the financial reform bill would limit the number of payday loans that a customer may take out to six a year and, if needed, require lenders to give customers more time to repay the loans. In addition, the amendment would give the Federal Reserve authority to license payday lenders.
Payday lending stores make big bucks. The Center for Responsible Lending reports that the average payday loan borrower pays $800 for each $325 they borrow.
With such profits at stake, trade associations and lobbyists for payday lenders are fighting hard. In fact, they’ve even enlisted the help of their customers posting appeals in their stores asking that they write or call Congress in protest. They argue that for some, with limited access to credit, payday lenders and check cashing stores are the only place where they can access loans. And, that states already have much legislative control over their businesses (some states do, yet most have yet to address the issue).
In the past year, Clearpoint credit counselors have seen a drastic increase in the number of clients who disclose that they have been caught up in a vicious cycle of payday loans which are never paid off as one rolls into another, rolls into another.
These loans, usually taken out by those with the least amount of money, come at a high price. Also, more and more people, usually on a fixed income or facing unemployment, rely on these expensive loans to cover living expenses. Yet, they are desperate to get out of their predicaments.
On occasion, payday lenders will work with clients on our debt management program.