Elizabeth Warren Takes on the Bad Credit Payday Loans Industry
When Elizabeth Warren was still teaching law at Harvard, she came up with a plan to help the country’s borrowers. The senator’s idea was to establish an agency that protected consumers from crooked financial companies in the same way that the Consumer Product Safety Commission keeps people safe from faulty washing machines. Warren’s efforts resulted in the development of the Consumer Financial Protection Bureau or CFPB. With the creation of the agency, Elizabeth Warren is taking on the bad credit payday loans lending industry.
Elizabeth Warren Takes on the Bad Credit Payday Loans Lending Industry
One sector of the financial industry has been able to find a way around state laws. This sector is payday loan companies. Elizabeth Warren’s CFPB has plans to go after these lenders, and it intends to do so in the form of federal regulations. The bureau’s lending regulations would override the state laws covering bad credit payday loans that many consumer advocates claim are too weak.
The Nation published a list of the CFPB’s proposed regulations. They include requiring lenders to verify whether borrowers have the means to repay a payday loan while they continue to pay for their regular monthly expenses. The agency is also proposing a limit to the number of times that a borrower can roll over a payday loan.
An Indicator of a Greater Social Problem
The success and profitability of the bad credit payday loans industry is an indicator of a greater social problem. According to Politico, during the last 10 years, too many Americans have had to borrow to get by financially from one month to the next. With Elizabeth Warren leading the charge against dishonest lenders, the country may be forced to face its culture of debt.
It’s not a mistake that stagnating wages coincided with the ease of getting short-term loans. For consumers who find themselves in an occasional financial predicament due to a car repair or medical bill, a payday loan is a handy convenience. And it’s easy to search out how to get a payday loan. In addition, the fees that payday loan lenders charge are often less expensive than the ones that come with a bounced check or a late mortgage payment. Short-term, bad credit payday loans can also save people from the embarrassing situation of asking for money from a friend or family member.
The Consequences of Easy Lending Practices
In today’s world, people need access to credit. However, when financial institutions are too keen to lend, there are consequences. For instance, during the subprime mortgage boom, housing prices surged higher than their value, which caused a crash. Only a few of the country’s counties have recovered from the incident.
The easy accessibility of student loans is causing an increase in tuition prices. This has inspired exploitative schools to enter the education sector. Students who are tricked into attending these schools are left in worse circumstances than they would be by entering the workforce with just their high school diplomas.
Rooting for Borrowers to Fail
Senator Elizabeth Warren is waging a battle against the payday loan industry because while lenders issue short-term loans under the pretext of providing freedom and flexibility, the business model of these companies relies on borrowers not being able to repay the loan right away. The CFPB investigated the industry, and it found that about half of all payday loan borrowers extend the payoff terms of their loans. Economist Aaron Klein said, “When a lender is able to profit from a loan, regardless of whether the consumer is likely to pay it back, you have a problem.”
How the Debt Backlash is Restructuring Politics
High levels of debt are causing a backlash, and this is restructuring politics. On the side of the Democratic Party, it’s the reason why Bernie Sanders was able to campaign so successfully. It’s also why a liberal rebellion occurred against Congresswoman Debbie Wasserman Schultz. People rebelled against Schultz’s support of payday loan lenders.
Republicans are also dealing with political conflict. A party that once stood for family values and fiscal conservation is about to nominate Donald Trump, a billionaire who is infamous for his debt and bankruptcies. He has made claims that he’s forced his creditors to take less than he owed and believes that America should follow his lead.
Cracking Down on Bad Loans
The new rules will test the CFPB’s ability and power to encourage the consumer economy toward a healthier future. Meanwhile, consumer advocates are busy pressing the bureau to crack down on bad loans while encouraging the nation’s financial institutions to offer affordable loan alternatives for borrowers. To learn more about Elizabeth Warren’s crusade against the payday loan industry, visit the PersonalMoneyStore.com.