Senator Dick Durbin (D-Illinois) has introduced a bill that could substantially change the payday lending industry. In fact it has the possibility of eliminating this type of lending all together. The Protecting Consumers from Unreasonable Credit Rates Act (S. 500), would impose a federal interest rate cap of 36 percent Annual Percentage Rate (APR) on all consumer credit transactions. Several states have already enacted similar and even more restrictive interest rate caps. Those states already enforcing a 36 percent or lower limitation would not be affected by the proposed legislation. Additionally, a 36 percent interest cap law is already in place for U.S. military personnel and their families.
Military Payday Loans lenders charge annual interest rates that climb into the hundreds. Payday loans are meant as a short term loan with a typical payback time of two weeks. However, many borrowers choose to renew these loans for additional periods of time, causing the interest expense to skyrocket, and lessening the chance for a timely payoff. Over time, this can have a crippling effect on individuals that can't break the cycle of borrowing.
In Senator Durbin's hometown of Springfield Illinois, the city council has taken progressive measures to reduce the impact of "predatory lenders" on the community. In January they passed an ordinance that requires a minimum distance between payday loan stores on MacArthur Boulevard, one of the city's main traffic areas. The requirement of this type of action has certainly fueled Senator Durbin's quest to fundamentally change or eliminate the practice of payday lending from the federal level.
Whether or not Senator Durbin's legislation is successful remains to be seen, but it doesn't hurt that he has the support of the Obama administration. During his presidential campaign, President Obama outlined his "Plan to Strengthen the Economy" in which he promised to "Cap Outlandish Interest Rates on easy payday loans and Improve Disclosures" and "Encourage Responsible Lending Institutions to Make Small Consumer Loans".
Be it from the state, federal, or even the local level, changes to payday lending are certainly on the horizon. So what will payday lenders do to stay afloat? Many of them are making the switch to traditional installment lending practices. With the help of creative software solutions they have been able to offer many of the same online approval, decision and payment conveniences that their payday loan customers have come to expect, thereby lessening the impact of this service transition. Nimble companies are seizing the opportunity to make this switch before it's too late. The payday lending industry is facing a major overhaul. If Senator Durbin's legislation passes, payday lenders will be forced to adapt to new lending practices in order to survive.www.militarypaydayloans.me
No comments:
Post a Comment