Lenders of small cash loans are rightly concerned that policy changes could put them out of the cash loan business. The Consumer Financial Protection Bureau, or CFPB, has released a set of proposals that could certainly do so, but before making a decision regarding what terms the lenders of cash loans are permitted to offer to millions of the country’s borrowers, officials allowed the public to have its say. However, time is running out for lenders of cash advance loans. In an attempt to shift the conversation their way, some lenders asked their customers to send comments to the CFPB explaining that their families will suffer if this type of borrowing option ends up leaving their communities.
Lenders of Cash Loans Find that Time is not on Their Side
When the CFPB officially imposes regulations against the short-term lending industry, many companies will be waiting to see if their customers were able to inspire the agency to make changes to its initial proposals. The Tampa Bay Times reports that approximately 1.5 million comments have been sent to the CFPB.
One customer from Tampa wrote a note that said, “I am on disability, and unfortunately, my once a month check does not cover my monthly expenses. I actually rely on cash advance loans in order to survive.” Another said, “If you change the cash loans program, you will put more stress on families that work from paycheck to paycheck.”
Alex Horowitz, a senior administrator for Pew Charitable Trusts, said, “This rule-making has generated enormous interest. It demonstrates that this is high-stakes rulemaking. It could save low-income households more than $10 billion a year.” According to Horowitz, it will probably take the CFPB about a year to impose regulations against the lenders of cash loans.
Google Uses its Power to Make a Statement
A few months ago, The New York Times reported that Google intended to ban all marketing efforts for payday loans as well as for related products like cash loans. The director of the global product policy for Google, David Graff, confirmed that the ban would be a global one.
In a blog post, Graff wrote, “This change is designed to protect our users from deceptive or harmful financial products. Ads for financial services are a particular area of vigilance given how core they are to people’s livelihood and well-being.”
Advocates of tighter regulations on cash loan lenders welcomed the move made by Google, but most lenders are concerned that the action taken against them by the company could work to push them out of business entirely.
Marketing to Those who Lack the Cash
When it comes to advertising cash advance loans, lenders hone in on Americans who lack the funds to pay for unexpected expenses. According to The Washington Post, legislators must take action to protect vulnerable borrowers from cash loan lenders. The publication states that sensible public policy would support and extend responsible lending by financial institutions that are interested in community development. However, few of these types of lenders exist. Too often, people take out cash advance loans when they’re unable to cover their daily expenses, and in this situation, most banks refuse to lend.
Low-income residents require access to affordable lending options. In addition, federal and state officials should pass living wage laws as well as a host of other measures that address the base cause of economic insecurity and financial inequality since these issues make cash loans appealing.
This summer, the CFPB announced new regulations designed to stop payday debt traps. According to the agency, it would do this by capping the cash loan amount that lenders could borrow to consumers as well as the number of cash loans that one person could take out.
An Absence of Borrowing Options
Even as cash loan opponents take steps to protect the working poor from harmful lenders, they admit that there is an absence of borrowing options for people who need small-dollar loans for a short time. The Pew Charitable Trusts has urged the CFPB to enact regulations that would make it easier and more tempting for traditional financial institutions to provide small-dollar loans to these borrowers and at a cost that they can afford.
Judging What They Do Not Need
It’s easy to judge those who need cash advance loans when one has the financial standing to borrow through other methods. For too many people, cash loans are the only borrowing option that they have when money emergencies arise. If the CFPB and Google manage to shut down short-term lending, who will these borrowers turn to? The answer to that could be more disturbing than the lending options that are currently in place. To read more about time running out for the lenders of cash advance loans, visit the Personal Money Store.