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Back in June, the CFPB or Consumer Financial Protection Bureau released a series of proposed rules to tackle predatory lending. The primary targets were Payday Lenders and Auto Title Lenders.
The goal is to protect consumers from financial products that keep people trapped in a cycle of bad debt. After all, the average payday loan borrower has to rollover or in other words refinance, their loan close to 7 times before successfully paying back the debt. Each time incurring additional fees and cost of the loan.
Naturally, the payday loans industry and auto title lending industries will be lobbying pretty hard against the proposed rules. They won’t go unopposed however. A movement called Stop the Debt Trap has done a great job of garnering support from other organizations to sign on to supporting the CFPBs rules to help regulate the industry.
It will be interesting to see how things pan out. Those against the measure say that it will destroy the industry (something like an 85% reduction in loans) and take away access to capital to those that need it. Proponents argue that it will alleviate the burden on those who are already strapped for cash and open up better options in the market for borrowers.