Tag Archive | Alternative financial services

Payday Lending Limitations may leave Borrowers out in the cold

Canton, Ohio is a city that is very much a typical American town. There are about 73,000 people living in Canton. It is also known for being the home of the Pro Football Hall of Fame and is known for having a thriving art scene in the downtown area. You may not know it, but Canton is also a city that serves as the nerve center of the payday lending industry. These smaller dollar loans allow people to borrow money for emergency expenses and to pay the lending company back a few weeks later. There are a lot of lenders in Canton, and a lot of people who regularly borrow money from these lenders.

Tanya Alazaus is the manager of a payday lending store in Canton. During a typical business day she sees a lot of regular customers and works hard to make sure that people get the financial services and products that they need to get by. Alazaus is a lot like any business manager or owner, and she works hard to make sure her customers get great service. It is her job. One that may be in danger if new payday lending limitations get put into place.unsecured-loans-can-be-easily-obtained-through-payday-lenders-direct-6516

Federal regulators are on a mission to crack down hard on businesses just like the one that Tanya manages. They consider payday lenders to be predatory and are coming up with new regulations that will likely lead to a serious decline in the overall volume of loans given each year. Additionally, the new payday lending regulations will probably force thousands of lending locations to close their doors for good.

The main agency that is working hard to over-regulate the payday lending industry is the Consumer Financial Protection Bureau. This agency has drafted new rules for payday lenders that will lead to greater overhead costs associated with providing loans, and that will put a cap on how many loans people are allowed to take out over the course of the year. These two repercussions alone are likely going to spell disaster for small lending companies, like those that help to prop up the economy in Canton, Ohio.

Many lenders are worried about what will happen to their customers if they are unable to get payday loans in the future. Ms. Alazaus said, “My customers look forward to being able to walk in here for their short-term needs. They would rather use us than things like credit cards, and most don’t even have the ability to use those.”

Ohio is a state that has some of the highest per-capita payday lending usage in the country. It is a state with more payday lending locations than it has McDonald’s franchises. There are already at least 14 states that have banned payday lending altogether. Ohio may soon join theses states in restricting payday loans completely. Factor that in with the federal regulations that the CFPB has been proposing, and it is easy to see the writing on the wall.

No one from the regulatory side of the house, though, seems willing to admit that imposing strict regulations on payday lenders is really going to only punish lower income American consumers at the end of the day. These are the people who depend on payday loans the most, and many of them have no alternative lenders to turn to when they are in need of emergency cash. If states, like Ohio, restrict payday lending, consumers are sure to suffer and people are going to needlessly lose their jobs. Makes you wonder just who the CFPB and other groups against free market concepts are really trying to protect.

 

Consumer Financial Protection Bureau looks to be Further Complicating Consumer Complaint Process

It looks like the CFPB is looking to add another layer of complexity to its customer dispute/complaint process. When this change goes through, consumers will have to wade through a two part online process that will ask consumers to give a rating to how a company handles complaints and to even log a wordy description that supports their dispute.

The CFPB is looking to get comments from the public about a recent request that came in as part of the Paperwork Reduction Act. This request would give people the chance to submit feedback on how the companies they are logging disputes against handle complaints internally. The Bureau plan on doing this with the addition of a survey and a free text section which allows consumers to describe their experience prior to the closing of a complaint.Consumer Financial Protection Bureau

The agency gave notice of this the first week of August. As of now, it is being called the Company Response Survey. It is slated to take the place of the dispute function that is currently in use and allows people to submit positive or negative feedback while they are filing complaints. The feedback will be looked at and any personal information will be removed prior to it getting officially published on the complaint database that the CFPB currently oversees.

This survey will ask consumers to rate how the company handles complaints via a one to five scale, while also including an opportunity for people to describe why they are giving the rating that they are. The CFPB published a Federal Register notice that stated, “Positive feedback about the company’s handling of the consumer’s complaint would be reflected by both high satisfaction scores and by the narrative in support of the score. Negative feedback about the company’s handling of the consumer’s complaint would be better supported and more useful to companies than the current ’dispute’ function.”

The CFPB will share the performance feedback information with the companies that respond to complaints to defend/represent its complaint handling process. Additionally, the CFPB will use this information to provide information to enforcement, supervisory and regulatory work that has a relation to the consumer financial products and services industry. The CFPB said that this survey is building on the foundation of a request that was submitted in 2015, and that it will allow the agency to stay centered on “… ways to highlight consumers’ positive experiences with financial service providers.”

The original CFPB consumer complaint database was launched to the public in 2012. The Bureau officially added complaints about debt collection to the database the following year. In the summer of 2015, they added complaint narratives to the growing database. This feature lets consumers share the experiences that they have had by using their own words. Since the database has been publicly available, debt collection companies have been the entities that seem to respond to the most complaints quickly. The CFPB published data that indicated that debt collection companies responded to about 93 percent of complaints logged in a timely manner.

It is worth noting that mortgage company complaints and complaints about credit card companies have made up a bulk of the consumer disputes received so far. Alternative financial service complaints have been few and far between. This is worth being aware of, being as the CFPB has seemed to focus a lot of its efforts on policing providers of alternative financial services, when it seems to be the traditional financial institutions that have generated the most complaints from consumers since the official launching of this database.

Consumer Lending Industry from the Perspective of Former Regulators

The free market is supposed to be based on consumers being able to freely participate in it along with healthy competition. Notice we said “supposed to be.” Yes, our free market system is still chugging away, but it could stand to have a few swift kicks to get moving as it ought to be. According to information released from the FDIC, about 92 million Americans are either underbanked or unbanked entirely. Some of these consumers don’t have access to lines of credit, and may not even have the financial savvy it takes to find viable options to credit. While all of this is going on, it seems that regulators are having a field day; making it even more difficult for financial service providers to offer alternative services to people and for consumers to get access to much-needed loans. Many small lending companies are the only providers that some consumers have access to or are willing to do business with. Regulations that may very well shut down the small consumer lending business may well help to make competition virtually non-existent and may actually work to lower consumer participation rates.Banks Being Scrutinized By Regulators for Payday-Like Loans

Even former regulators understand that sweeping changes to the small dollar lending industry is going to cause problems for many consumers. The people that utilize these types of financial products don’t need lines of credit for tens of thousands of dollars. No, these are the consumers who need a hundred dollars or maybe a few hundred in order to repair their car or to take care of emergency medical costs. The traditional banks are simply not willing to offer the types of smaller dollar, shorter term loans that people need for these kinds of expenses, which leaves millions of Americans scrambling for help when emergency expenses arise.

Back in 2008, only around 30 banks offered consumer loans for less than $2,500. Since then, larger banks, like U.S. Bank and Wells Fargo have stopped their lines of small dollar loans because of all the new regulatory pressures that lenders must deal with. Since that happened, the situation for unbanked/underbanked consumers has gone downhill fast. Consider the fact that 54 percent of African Americans are currently underbanked/unbanked. Some of these folks run into brick walls when they need to get access to fast money for emergency expenses, but don’t have the options that many other Americans enjoy. Because many unbanked people have poor credit histories, they have no choice but to seek out alternative financial service providers. It is either that, or they have to take their luck with selling belongings, or worse yet, dealing with loan sharks.

Every consumer, including the unbanked and underbanked, need to have access to small dollar loans. And the lenders that provide these types of financial services need to do business in a way that allows them the ability to be profitable and successful. Upcoming small dollar consumer loan regulations may take away the ability for some of the most underserved financial participants in this country to gain access to emergency funds. And the regulations may drive legitimate lending operations completely out of business.

More than a few former financial regulators and watchdog group members have chimed in on this subject, with many of them saying that the proposed regulations coming down the pipeline are sure to spell financial disaster for many underbanked/unbanked households in this country. These warnings seem to be going completely unnoticed, as the Obama administration continues to utilize resources, like the CFPB, to put undue pressure and scrutiny on both small dollar lending companies and the people who depend on these types of loans to survive.

What you Really Need to Know about Payday Loans with No Credit Check

Unexpected expenses often happen at the worst time. With millions of people in this country essentially getting by from one paycheck to the next, it is tough to deal with those types of expenses. Cars break down, appliances go on the fritz and pretty much anything can happen that necessitates a little bit of extra cash. If someone needs say $100 or even $500 to cover an expense or pay a bill, it’s not like they can simply run to the neighborhood bank and get a quick loan. That’s pretty much why payday loans with no credit check offers from payday lenders are such a popular choice these days.

Payday loans have been in the news a lot lately; for better or for worse. Like anything else, there are people out there who are dead set against the payday advance lending industry. However, there are millions of people who don’t have money saved up for a rainy day. And lots of those same folks have had credit problems in the past. Being as banks and the big credit card companies run credit checks on people, a bad credit score can keep people from getting a small dollar loan or line of credit to cover life’s unexpected expenses.payday-loan-helps-build-credit

Let’s continue on and discuss how credit scores work with regards to taking out a small dollar, short term loan from a payday lending company. Since credit scores are used by so many institutions, including employers and insurance companies, it is a good idea for everyone to have a basic grasp on how their credit scores can affect their chances of getting a loan when money is tight.

Understanding Your Credit Score

We are going to discuss payday loans with no credit check a bit more. First, let’s take a look at how credit scores work. Having a financial problem or two can quickly lead to a lower credit score. People who file for bankruptcy or who make late payments to their creditors often find that their credit scores are negatively impacted. When people talk about their credit score, they could be talking about the score that is given by any of the three major credit reporting bureaus. However, the FICO credit score is the one that is generally seen as the most important.

Your FICO credit score can range from the lowest score of 300 up to a perfect credit score of 850. Unless you have had some major financial problems in the past, your score is probably not anywhere near 300. And unless you have managed to do everything perfect with regards to your financial past, your score is probably not perfect either. Most Americans have a credit rating that falls somewhere between the two extremes. But what makes a credit score “bad”? A FICO score of less than 601 is generally considered to be subprime (bad) by most creditors and banks.

Payday Loans with No Credit Check for Subprime Borrowers

When someone has a bad credit score, they can pretty much count on the big banks turning them down if they should need a loan. This is where payday lending companies come into the big picture. Payday advance lenders offer their clients payday loans with no credit checks required. To make a long story short, it does not matter how many financial mistakes someone has made in the past or how low their credit score is. If someone needs fast money, they can turn to payday lenders to get access to funds without worrying about their credit score holding them back. Being as millions of people have wound up with low credit scores because of all the worldwide financial problems of recent years, it is nice to know that people with less-than-perfect credit ratings can still get access to money when they need it most.

Important Information about Payday Loans with No Credit Check

Before taking out a payday advance loan, it is important to understand these types of loans inside and out. Here are some important pieces of information that you should keep in mind if you believe a payday loan is in your future:

• Payday loans are not designed to hang over your head for years. The whole point of these loans is to give someone cash until they get to their next payday. The average payday loan is paid off in full in just two weeks.
• A payday loan is an unsecured loan. There is no need to offer any property as collateral on the loan.
• To qualify for payday loans with no credit check, potential borrowers must be able to prove that they are employed. Borrowers should also have a checking account to provide automatic payment when the loan term is up.
Not paying a lender back on time will result in additional fees. These fees are laid out for you when you apply for a payday loan. It is best practice to avoid missing the originally agreed upon payment date.

Payday Loan Fees

We just mentioned late fees, but there are other loan fees that borrowers should be aware of. Payday loans, since they are short term loans, do not required borrowers to pay annual percentage rate fees, instead borrowers pay a flat rate fee to the lender when they take out their loans. Every lender charges different amounts for the loans that they provide. If you are going to take out a payday loan, either online or at a local cash advance location, make sure that you know exactly how much the loan fees are going to cost. As long as you pay back your payday loan on time, you should not have to worry about any additional fees.

This blog is filled with other helpful articles and posts about short term loans. We hope that you have learned a bit about the basics of payday lending from this introductory post. Thanks for stopping by and feel free to check out some of the other resources on this site to find even more helpful information.

Are Payday Loans a Better Deal than Traditional Bank Loans?

If you have been keeping track of the latest news over the past few years then you probably already know that the mainstream media outlets have a serious ax to grind with the payday lending industry. And with the government doing its best to crack down on payday lenders, there is even more bad news about this particular financial industry. But, as is usually the case, we are only hearing part of the story when we get our news from the typical news outlets and websites. The fact of the matter is that there is more to payday loans than meets the eye – especially when that eye belongs to the typical news resource or website.flexibility

Case in point – a new study released by the New York Federal Reserve Bank seems to disprove some of the most widely circulated half-truths and lies that are reported with regards to the payday lending industry. The report actually points to some areas where payday loans can actually be more affordable than having a traditional checking account at the local bank branch. This may sound crazy to some, but the numbers simply do not lie.

The report mentioned the median overdraft fee of just $27 for a bounced check, not even including any of the flat rate fees that banks might charge. By way of comparison, payday loans that use deferred deposit (typically a post-dated check that is used as the form of payment) usually charges right around $15 for every $100 that is borrowed.

When those costs are compared, the cost of bouncing a few checks or actually biting the bullet and getting a payday loan to avoid those bank fees, it makes a bit more sense. The bottom line is that for some people it just flat out makes more sense to pay less by getting a payday loan instead of paying the higher costs of overdraft fees enforced by most traditional banks. And when you consider the wide availability of payday loans, it is easy to understand why more Americans are taking out these types of loans than ever before.

To be fair, we must mention that the study in question was underwritten by an industry trade group that works with payday lenders – the Community Financial Services Association of America.

Johnny Gordon, an industry spokesperson, said, “When used correctly and for relatively small amounts, cash advance or payday loans can be both economical and convenient.”

The study also showed that payday loans are far more accessible to more people than traditional checking accounts are. There are millions of American consumers who are either underbanked or unbanked right now. The unbanked people of this country many times do not have the ability or access to open traditional bank accounts, so payday loans and other alternative financial services are their only options to stay on top of their finances.

Gordon summed this fact up by saying, “Overdraft and other similar programs require extensive credit checks and comprehensive income documentation.”

The media outlets in this country like to cherry pick the topics that they report on. We will all surely see lots of negative reports about payday lenders from most of the news websites and programs that are so popular these days. This report only focused on a particular aspect of payday lending and is not the end of the story where payday loans are concerned. However, it is nice to see official reports that show the other side of the coin where payday loans and other alternative financial services are concerned. People need access to the whole truth in order to make informed financial choices for themselves.