It has finally happened. The Consumer Financial Protection Bureau (CFPB) has issued the new regulations the organization has cooked up to regulate the smaller dollar lending industry. Payday lenders, installment loan providers and other smaller lending companies are those most likely to feel the impact of these proposed regulations. Officially, the CFP’s regulations are said to be targeting payday, installment and vehicle title lending companies.
It is not possible to take a look at all of the details of the new regulation in a single article, but that is not because we aren’t willing to write about them; it is because there are in excess of 1,300 pages in total. It is obvious to most that the new regulations include some of the bullet points that were included in a draft that the CFPB put out back in 2015.
There are more than a few industry experts who believe the new regulation is not moving in the right direction, that it is based on flawed logic/data and that it will ultimately harm the consumers who rely on alternative loans for emergency expenses.
Why is the premise of the new regulations flawed? It is because it is not feasible or possible for a third party organization to analyze the situation with any objectivity. The premise is already generally believed to be that short term lenders are charging too much for their services, which traps consumers in never-ending cycles of debt. With this premise in mind, it is easy to see how a third party organization could not possibly analyze the scenario with even a shred of objectivity. The value that people believe they get from these types of loans is completely subjective, and that includes things like fees and interest rates on smaller-dollar loans.
The thing that so many do not want to admit to is that payday lending companies are in business because they provide a service that their customers consider valuable, and that millions of consumers have already proven that they are willing to use and able to pay for. This adds up to the fact that it doesn’t matter if some people think these loans are offensive, if the people who take them out strongly disagree.
Some of these lending companies, notably the provider of installment loans, have been in business for a hundred years or more because they actually help their customers. Consumers regularly use smaller-dollar loans to take care of a wide array of expenses, many of which seem to come for people at the worst possible time.
These forms of alternative credit allow people to purchase things, like furniture and appliances. They even allow some folks to pay the rent or to get their cars repaired. If the small-dollar lending industry is regulated so heavily that consumers find themselves unable to get a loan, potentially millions of people could go without cash to buy furniture for their homes, appliances to help with the housework or even a working vehicle to get to their jobs.
Everyone who sees just how bad these new regulations could potentially be, still have a thread of hope and common sense that they can cling to. It would be beneficial for all parties involved if the new bill from Senator Ted Cruz and Rep. Joh Ratcliffe passes. Essentially, this bill would get rid of the CFPB, and allow the existing – and more capable – government organizations that are tasked with protecting consumers to do their jobs and to actually provide helpful services to American consumers; particularly lower-income consumers who could potentially face a whole host of new financial challenges if the CFPB is left free to do what it has been doing for the past five years.