Attacks on fast cash payday lenders have increased dramatically in recent years. At the national level, the Office of the Federal Register has published the final regulations proposed by the Consumer Financial Protection Bureau, commonly known as the CFPB. The new regulations take direct aim at payday lenders as well as lenders who offer title loans and certain other small dollar loans. Many industry insiders believe that the proposed regulations will reduce the availability of these payday loans by forcing many payday lenders out of business. According to an article published in the Credit Union Journal, even credit unions and community banks believe that they will no longer be able to offer these types of loans if the regulations proposed by the CFPB become law. Despite the burdensome regulations that are currently pending, however, some states have felt compelled to enact or propose legislation regulating payday loans in their states. Nevada has become the most recent state to announce an attempt to restrict payday merchants offering to get cash fast to their customers.
Nevada’s Plan to Restrict Merchants Offering Payday Loans
According to an article published in August 2016 by the Las Vegas Review-Journal, Dan Schwartz, the state’s treasurer, plans to introduce two bills targeting payday loans during the 2017 legislative session. One bill is intended to protect teachers and veterans from the need to use payday loans by creating a public corporation to give them access to emergency funds. The second bill is broader and more restrictive. It states that individuals cannot have more than one payday loan at any given time and requires that 45 days must elapse between the repayment of one loan and the issuance of another. Furthermore, the law proposes that the state create and maintain a database of all payday loan activity in Nevada to make sure that lenders comply with the new provisions.
Current Payday Lending Laws in Nevada Contain Few Requirements
Nevada has been one of the more lenient states when it came to regulating short-term loans such as fast cash advances and payday loans. According to information posted by the National Conference of State Legislatures, Nevada has no maximum limit on the loan duration, and the only maximum set on the amount of the loan is that it cannot exceed 25 percent of the borrower’s gross monthly income at the time of the loan. There is no limit on the number of simultaneous loans that a borrower may have or the number of times that a loan may be renewed. The only other requirement is that lenders do not violate Public Law 109-364, which is also known as the John Warner National Defense Authorization Act. As published by the Department of Defense, this law, which only pertains to military personnel and their dependents, severely limits renewals or refinancing of loans, bars creditors from using a check or automatic draft on the borrower’s account to receive payments, prohibits vehicle title loans and limits the annual percentage rate to 36 percent.
What Inspired Nevada’s Proposed Regulations for Payday Lenders?
According to the treasurer’s chief of staff, when Schwartz hosted financial learning workshops for consumers, he became aware that some consumers had problems paying off their payday loans. Participants shared stories with him of taking out multiple loans, borrowing from one lender to repay a loan from another lender or using a new loan to repay an existing loan with the same lender. Some of the workshop participants revealed that they were falling deeper in debt in their attempts to get ahead financially, and many blamed their payday loans for their money problems.
Is the Answer to Regulate Payday Lenders Out of Existence?
Schwartz may not be a fan of payday loans, but even he believes that the answer to the problems that consumers face is more complex than simply banning payday loans. He feels that financial literacy should be taught in Nevada schools to educate young people on how to handle credit wisely. He believes that the knowledge needs to be made available to citizens of all ages through workshops or other methods.
Interestingly, the financial experts at The Motley Fool echoed his sentiments in a July 2016 article. The article reported that when the Financial Industry Regulation Authority provided a test containing five multiple-choice questions, a mere 24 percent of those classified as millennials passed. The questions covered basic concepts such as inflation, interest and mortgages. However, the article reported that the most dismal data came from a study of 15-year-olds in 18 countries that was conducted by an agency of the Organisation for Economic Co-operation and Development. American students scored below average in the study, which included basic financial concepts such as budgeting and reconciling a bank statement. In fact, American teenagers scored lower than participants from countries such as the Czech Republic, Latvia, Estonia and Poland.
What Will Happen Next in Nevada?
It is impossible to predict whether the proposed bills will become law in Nevada. The 2017 session does not open until February 6, which means that the proposed CFPB regulations should be federal law before the Nevada legislators convene. At that time, Nevada may decide that the federal laws are sufficient, but legislators may decide that they want even more stringent laws passed. You can stay current on Nevada’s proposals and the pending CFPB regulations at the Personal Money Store. You will also find a variety of helpful articles on many different financial issues.