Look at this.
Explain what a payday loan is.
A payday loan is a quick way for someone to get a small amount of cash with minimum qualifications.
We have seen payday loans have become more important as people have been struggling to pay their bills.
About 58% of payday consumers have problems paying their bills every month.
This is a way to get emergency funds when they need it.
What is the problem with it?
Why is congress looking into it?
Looks there are some problems -- there are some problems because the interest rate is so high on these loans.
Typically consumers pay between $10 and $20 for every $100 that they borrow.
That annual interest rate is above 300%. the question is when does this product becomes something consumers demand and become predatory on the part?
This is what congress look at last week, targeted towards seniors.
It could be discussed broadly for the payday lending consumers as a whole area who gives out these loans?
Is at a banking issue, is it a too big to fail issue?
For a long time the payday lending industry has not been regulated.
There is a new twist that cfp b b is regulating the non-bank industry.
This could come under new regulations that limit or curtail their ability to make these loans.
On the bankside, only six banks even up roach offering a -- even approach offering a product similar to payday lending.
They include wells fargo and u.s. bank.
This is called deposit advances.
This way consumers can borrow from their deposit and it is secured by their next paycheck or by a social security payment.
You have gotten my attention.
Are they charging people 28% to get an advance on their social security check?
In many cases they are charging much more than that.
This is why congress has their ears open.
This is why c fpb is taking a look at the issue.
This is why the occ is coming out with guidance for the six banks on how to do this in a way that doesn't trap consumers in a get cycle.
Wouldn't it be ideal if the consumer was just made aware of the information, make sure they know the risks i know what happen if they cannot pay it back.
Consumer education will go a long way to understanding the terms.
The industry will say that these terms are crystal clear and that the c fpb and other regulators are being a bit paternalistic.
What we have to understand is that this country has never been very good at offering low income credit access.
We saw that in the subprime crisis, when we try to expand mortgage loans to people who could not afford it.
We are starting to see it in the small loan market.
It's a something that the government and the industry needs to work together to solve.
Very interesting.
Thank you for bringing it to our attention.
