The Consumer Financial Protection Bureau proposed new rules
on Thursday designed to end what it calls "payday debt traps" by
requiring lenders to make sure a borrower can repay that loan before
approving it.
The new rules would cover a variety of
small-dollar loans marketed to financially vulnerable consumers, such as
payday loans, auto title loans (where the vehicle is used as
collateral), high-cost installment and open-ended loans.
CFPB director Richard Cordray acknowledged that
people who live from paycheck to paycheck may need a loan to cover
unexpected expenses or a drop in income, but he said the credit products
marketed to these consumers should help them, not hurt them.
"Too many borrowers seeking a short-term cash fix are saddled with loans
they cannot afford and sink into long-term debt," Cordray said in a
statement. "It's much like getting into a taxi just to ride across town
and finding yourself stuck in a ruinously expensive cross-country
journey. By putting in place mainstream, common-sense lending standards,
our proposal would prevent lenders from succeeding by setting up
borrowers to fail."
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Source: NBC News
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