The Consumer Financial Protection Bureau has announced a new proposal to target bad payday lending practices that can trap customers in unsustainable long-term debt.
The proposals would extend consumer protection to various kinds of short-term or cash loans including auto-title loans, payday loans, and some installment loans, requiring lenders to make more efforts to establish whether the customer would be able to meet their loan obligations without compromising their overall financial well-being.
The proposals would also prevent lenders from accessing a customer’s bank account for payment collection, and oblige them to keep customers informed of any attempted payment collection action.
These changes to the regulations governing short-term loans will not prevent unwary customers from getting into financial difficulties and the advice from financial services experts is to consider all your options, and to make sure you shop around. According to Bruce McClary of the National Foundation for Credit Counselling, many customers make the mistake of assuming they won’t qualify for a loan from a bank or a credit union:
“That assumption is a costly assumption,” said Bruce McClary said. “Don’t make a decision without knowing where you stand.”
If you really have no choice but to take out a short-term loan, then the advice from the personal finance experts is to check which regulations apply in your state, and to read up about the lender online. Doing your homework and checking out the small print is crucial.
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