Some of you might have already heard from the Chicago Tribune of the new restrictions proposed by the Consumer Financial Protection Bureau regarding payday loans and other companies that offer short-term loans with higher interests. They want to implement these restrictions in order to protect the borrowers since these kinds of loans are packed with fees other than the high interests that they initially have, a lot of borrowers tend to be even more buried in debt after taking the loan.
What Loans are Targeted?
The main targets of these restrictions are payday loans and any other short-term costs that have high interests. Loans like these are paid by the borrower in their next payday or at least that’s what the borrowers aim to do. Installment loans have not escaped these restrictions even though they work a little differently when compared to payment loans since these loans are paid over a longer period of time. Auto-title loans will also be governed by these restrictions; auto-title loans are a type of loan that requires cars as collaterals.
Aren’t the Borrower’s Screened?
Typically lending companies would ask tons of information, collateral and credit history before they get approved for a loan. This is not the case for those that offer payday loans and other short-term loans, they may ask for proof of a steady income from the potential borrower. Other than that, the borrowers are not required to present anything that proves their ability to pay.
When Will These be Implemented?
As we mentioned, these restrictions are just proposed restrictions at the moment. It needs to go under various checking, studies and researches. Not only that but it will go through what a call a comment period before the final version of the restrictions and rules are announced; the overall process might take at least a year.