Sometimes you might be caught by something unexpected during the month and fall behind on your bills because of the extra expense. It can be hard to make your money stretch as far as it needs to and a cash advance loan can seem like a good idea to help with this predicament. However, there are some things to keep in mind when it comes to the regulation of payday loans and how it can affect you.
The Regulation of Payday Loans Is a New Thing
The companies that offer cash advance loans were able to act with no one watching them for many years; however in 2012 the Consumer Financial Protection Bureau (CFPB) took over in order to make sure that they are no longer able to act without impunity. When the CFPB took over the regulation of payday loans, they started to take legal action for consumers that had been treated incorrectly by some of these lenders. A couple of the largest payday loan companies were actually directly affected by this decision.
The companies were found to have violated several rules and were punished for things like:
- Violating military lending policies.
- Improper signatures on court documents.
- Improper collection procedures. These included harassment tactics and using threats in an attempt to try to coerce consumers to pay back their loans. It also included releasing loan information to relatives and employers.
Reasons for the Regulation of Payday Loans
The CFPB began their regulation of payday loans and lenders to protect the consumers and make sure that they were being treat fairly. When they started investigating the ways that the lending companies do business, they found some very disturbing details.
- The majority of payday loans are immediately renewed after they reach their fourteen day maturity.
- Fifty percent of cash advance loans are taken ten times or more.
- Most of the loans that are made more than once are for the original amount or a higher amount.
- When someone takes an advance once a month, they are much more likely to be paying for almost a year.
- Once a loan is taken, it is much more likely that the consumer will keep remaking it rather than paying it off and making a new loan at a later date.
All of these facts can lead to more understanding among consumers with regard to just how detrimental it can be to start down the path of taking payday loans. It shows that you can soon enter a vicious debt cycle and this will make it even harder for you to recover from.
Consumer Education Is Part of the Regulation of Payday Loans
Because of the extensive investigations that the CFPB has made public, they now keep a database filled with the answers to all sorts of questions that might be asked by consumers considering these types of loans. The information that you can find there can help you make up your mind about cash advance lenders.
Here are just some of those answers.
- Payday lenders are not required by any rule or regulation to give you the lowest interest rate there is.
- Payday loans can’t usually help your credit because they are not reported to the agencies in general.
- You can’t go to jail for not paying your loan back to the lender.
- They also can’t garnish your wages unless they take you to court and an order is established to do so, in most cases.
- Cash advance loans are not allowed in all states. Some places forbid them in their entirety.
You can also find more specific information on the regulation of payday loans on line and even ask your own question if you can’t find it already answered.
You can submit complaint to the CFPB.
If you have run into any problems with a payday lender then you can also reach out to the CFPB in order to get it resolved. For example, if you have noticed inappropriate charges, are not getting the money as agreed, have noticed fees that you were not made aware of or can’t get the company to speak with you, then the CFPB is there to help. Once you send them a complaint they deal with the payday lender for you and that lender has fifteen days to respond to the complaint.
You should also keep in mind that they will share this information with the agencies in your area that enforce the laws and with the federal government, as well. The CFPB might use your complaint on their website for others to see, also. If they do this they won’t show any personal information, of course.
As you can see, the CFPB is working hard to keep the payday lenders under control. If you are forced to use one of these companies, you can rest easy knowing that you have someone on your side.