have achieved a notorious reputation for trapping borrowers in a never-ending cycle of debt. People who borrow payday loans are stuck with high interest rates that make payments unaffordable. Borrowers behind on payments may also be enticed by lenders to roll over their loans, a process where borrowers pay fees to delay repayment. When borrowers can no longer make payments, payday lenders pull money from their bank accounts. For these reasons, payday lenders have attracted the attention of the Consumer Financial Protection Bureau (CFPB) and state lawmakers. Some states have passed laws capping interest rates on short-term payday loans and others have banned rollovers. The CFPB has also proposed rules that would place further limits on businesses offering short-term payday loans. Installment Loans Still Cause Serious Financial Problems Payday lenders have responded to new rules and regulations by changing their business model. Instead of offering short-term loans that are typically…
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If you are receiving constant phone calls for past due medical bills or other debts, it may interest you to continue reading. The Consumer Financial Protection Bureau (CFPB) is pushing for an overhaul of the debt collection industry that could end abusive practices carried out by third-party collectors. Third-party collectors are the ones who buy debts in massive datasets (containing information on tens of thousands of consumers) for pennies on the dollar. First-party collectors are generally subsidiaries of companies collecting past-due debts. According to the CFPB, new rules are needed to improve accuracy and accountability within the debt collection industry. How the New CFPB Rules Would Prevent Debt Collector Abuses If you are being pestered by third-party collectors, here are four ways the new rules could affect you. Prove the debts belong to you: Collectors would be required to prove the past-due debts in question belong to you. Information such…
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The Consumer Financial Protection Bureau (CFPB) has promised to curtail the unethical borrowing practices of payday lenders. Created in 2010 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has been tasked in part with protecting Americans from financial abuse. Payday loans have a bad reputation for good reasons. These types of loans are generally taken out by people who are in a bind or some other type of financial emergency. Payday lenders prey on this desperation by offering borrowers a short-term lifeline, but with steep interest rates and fees. A person could borrow $600, but owe $680 two weeks later. Many payday loan borrowers roll their loans over, meaning fees are paid to delay repayment in full. These fees are added to the original balance. As the balance goes up and loan payments are delayed, interest continues to accumulate (sometimes at over 300 percent…
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