Tag Archive | Consumer

Payday Lending Restrictions will harm Lower Income American Households

It is no secret that the mainstream media and some government watchdog groups seem to loathe the payday lending industry. If you believed everything that got reported on this industry, you might think that there is no reason for it to be in existence. However, that would fly in the face of the fact that millions (some say 10 to 12 million) of people every year rely on payday loans. The Consumer Financial Protection Bureau recently proposed some rules that they say will help to protect consumers from the potential pitfalls of payday loans. Opponents of payday lending have applauded these new rules, but the elephant in the room is the fact that the new rules may wind up hurting the very consumers that they were supposedly created to protect.Banks Are Offering Payday Loan Type Services

The CFPB has never come out and demanded that the payday lending industry go away completely. But the new rules are based on extensive underwriting for the loans; essentially forcing lenders to do extra leg work to make sure that consumers are able to pay back the loans that they take out. The additional checks and balances that payday lenders will have to go through in order to make loans will likely result in many of them being unable to afford to stay in business.

Some crafty investors are working on their own versions of payday loans to swoop in and snatch up their share of the growing number of people who demand short term, small dollar loans. Uber recently announced that it will allow its drivers to get payday advances of up to $1,000 against their paychecks. The money will be paid back directly from the drivers’ pay checks. And Uber is not the only company that is cooking up new ways to offer services that look a heck of a lot like traditional payday loans.

The CFPB has done what the government is known for doing from time to time. They have stepped in to put new regulations on an industry that is already undergoing massive transformations. And if the CFPB gets its way, the new rules will more than likely limit the options available to poor people. All the while similar financial services and products will become more available to middle class households. It is a reversal of fortunes that should never take place, and one that could have lasting negative impacts on lower income households for decades to come.

The CFPB has come right out and said that the new rules will raise costs for lenders and that they will ultimately lead to a reduction of total loan volume by more than 50 percent. So, the money that would have been lent to lower income consumers (higher risk borrowers) will more than likely end up in the wallets of people who have higher incomes (lower risk borrowers.) Anytime an aspect of lending is regulated the lenders will react by enacting new prices in their loan contracts. They have to account for the increased risk/cost somewhere, right?

They say that bad things tend to roll downhill. The poor in this country know this fact all too well. Unfortunately, it is usually the government who is causing the lack of fortunate financial circumstances that millions of people must contend with. The new rules being proposed by the CFPB are just another example of how a government agency can act on the “behalf” of a group of people and wind up making things even worse on that group of people in the process.

Some Democrats Divided over Payday Lending Regulation Issues

For weeks now, Representative Debbie Wasserman Shultz has faced searing criticism for her stance on legislation that could help to change the way payday loans are regulated in this country – some via TV spots. Why is everyone up in arms about Wasserman Shultz’s stance? Well, the left has a long history of holding a grudge against short term lending operations. And since Wasserman Shultz is a very influential, powerful leader of the Democratic Party, it is easy to see why some Dems are not exactly happy with her. This has all been big news lately, and this article certainly is not the first – or last – time Wasserman Shultz and the payday lending industry will be mentioned.Democrat-Donkey

What is somewhat quietly sneaking under the radar, though, is the fact that there are other elected officials from the Democrat’s side of the fence that are also starkly in support of new measures to delay/eliminate proposed regulations that the Consumer Financial Protection Bureau has been threatening to enact for some time now. For example, the U.S. Senate candidate Patrick Murphy has also thrown his support behind new legislation that seeks to postpone/radically change the plans that the CFPB has had in mind for quite some time.

Of course, taking a stand for something in this country means that you will without doubt face opposition. Murphy’s support of the new legislation has garnered the ire of his rival in the Senate race, Representative Alan Grayson. It seems that Grayson and other leaders in the Democratic Party, along with the CFPB, are intent on cracking down on the payday lending industry. And Grayson will likely use this difference of opinions on the matter as a key talking point as the race continues to heat up.

Murphy was not late to the game by any stretch of the imagination. He was one of the original co-sponsors of the bill, and was joined by other lawmakers from the state of Florida. These Florida leaders believe that the proposed CFPB regulations will do damage to regulations that were passed by the state Legislature a few years back. Representative Dennis Ross introduced the bill and it has gained plenty of support from members of the Florida delegation.

Sean Bartlett is Debbie Wasserman Shultz’s communication director. Bartlett recently stated, “Florida lawmakers know that before 2001, the payday lending industry was running roughshod over consumers in the Sunshine State. The State House and Senate voted unanimously at the time to make reforms that fifteen years later, better protect consumers while still preserving access to credit for working families who need it. The cosponsors of H.R. 4018 believe Florida’s model and experience can be instructive to CFPB as it considers its national rulemaking.”

Some consumer advocate groups, however, believe that the payday lending industry did what it could to influence the Florida payday lending laws. According to the Florida Alliance for Consumer Protection: “In exchange for minimal regulatory requirements, the industry was permitted to issue predatory loans, extracting millions in exorbitant fees each year from the Floridians that can least afford it.”

This battle is just beginning to heat up. And while Wasserman Shultz may continue to be the face of Democratic leaders supporting the new bill to the general media, it is clear that other party members have the same core beliefs about the strength of Florida payday regulations and the ability of states to do this type of regulation on their own. The alternative seems to be for states to simply roll over and allow the federal government, by way of the CFPB, to continue to hand down laws that could potentially destroy already effective regulation measures.

How Complaints Make Their Way to the Consumer Financial Protection Bureau

As a taxpayer, you have the right to know about services that are available to you. And even though the Consumer Financial Protection Bureau (CFPB) is in a bit of hot water with elected officials, business owners and private citizens right now, you should know a bit about how this government “consumer protection” group actually works. One of the most well-known things that the CFPB does is keeping track of consumer complaints about financial services and products. Here’s the thing – even if you never plan on submitting a complaint to this organization, you should be familiar with how the process works. After all, the CFPB is operating on a nearly limitless budget, and that is in no small way thanks to the tax dollars you fork out every year.

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To start a complaint that will get filed in the CFPB’s consumer complaint database, you visit consumerfinance.gov. There is a link on the main page to file a complaint. Once you click on the link, you’ll be on a site that collects basic information. There are two main categories used to get a complaint into the database: Loans or Products and Services. The Loans category includes mortgage, student loan, vehicle loans, payday loans or other loans that you can choose from. The Products and Services category includes Bank Accounts, Credit/Prepaid Cards, Credit Reporting, Debt Collection, Money Transfer/Virtual Currency or Other Financial Service. Getting a registered complaint started is easy enough, you just choose from one of the category links that we just told you about.

Diving Deeper into Consumer Complaints to the CFPB

When you choose the topic that best suits your needs, you are taken to a new web page. You get basic information about how the process works, and a button to get started. Once you start, you have to fill in a text box with a description of your issue. You can also opt in or out of having the CFPB publish your description on their website. You also get the option to choose from different descriptors related to your issue. Website visitors can choose the proper descriptors and then continue. This takes people to the page where they fill in text about the resolution they’d like to see. After that page is submitted, you get to a page where it asks for basic contact information. Some fields are optional, but you must put in your name and an email address to continue the process. Depending upon what your complaint is about, you will be taken to yet another page that asks for specific information, like account numbers, company names and even a place to attach related documents.

When you have everything filled out, you get a chance to review all the information prior to official submission. Once that is done, the CFPB can – presumably – begin looking into the incident and taking action. Whether or not that happens immediately, a couple of days later or even months later is not so easy to figure out. However you do get a tracking number, so you can come back to the site to see where your complaint stands.

All in all, it is easy enough to log a consumer complaint to the CFPB. We have seen that the bureau does take action on some complaints. It also uses the data it collects to produce reports, so the government and taxpayers know what the organization has been up to. If you have a consumer complaint and have not been able to get it taken care of on your own, it may be worth a shot to log an online complaint. But even if you never use this government website, you at least understand how the process works.

The Great Payday Lending Battle Understanding Florida Payday Loan Regulations

There are currently elected officials – both Democrats and Republicans – who have joined forces to push back against the CFPB’s new payday loan regulations. Many of the opponents of the CFPB’s proposed regulations have mentioned that Florida does a great job regulating this industry at the state level. As such, these people believe that states should have the right to regulate short term loans without interference from the CFPB or any organization that represents the federal government. To help you get more insight into this issue, it is wise to understand the Florida payday regulations for yourself. Here are some things you need to know about payday lending regulations in Florida

Number of Loans are Restricted as are Loan Amounts

A borrower can only have a single outstanding payday loan at any given time. There is a centralized database that is used to track every payday loan processed in the Sunshine State. When a borrower pays back their loan, an extra 24 hour cooling off period is tacked on prior to that person being able to take out another loan. The maximum amount that someone can borrow from a payday lender is $500.

payday21Terms of Florida Payday Loans

A payday loan cannot be given for less than 7 days or more than 31. These loans cannot be rolled over. For example, if someone takes out a two week payday loan, the lender is not allowed to rollover (renew) the loan, tacking on extra fees and running the life of the loan for another two weeks. Note that in this scenario the total loan time would be under 31 days. Terms are set when a borrower takes out a loan. However, if they are not able to pay, loans can be extended without any additional fees being charged.

Payday Loan Fees

The laws in Florida put limits on fees that can be charged on payday loans. The fee cap is set at 10 percent of the loan amount. Additionally, any loan costs, like verification fees, are strictly limited to just five dollars per loan. It should also be noted that the fee cap is not one that accrues over the course of time. If someone were to take a year to pay off a payday loan, for example, the 10 percent would not snowball into a huge fee. If it were for a $200 loan, the fee would never be more than the 10 percent, or $20, plus costs that top out at $5.

Payday Loan Grace Periods

In Florida the law states that borrowers are given a 60 day grace period if they are not able to pay back loans on the original due date. In order to get the grace period, though, borrowers must set up an appointment with a credit counseling agency within a week of the loan due date and complete a credit counseling course within the 60 days of grace that are given. The credit counseling company may recommend a repayment plan, and the borrower must pay their debt according to this plan without incurring any extra fees or loan costs.

Collection Policies

If someone gives a lender a check and the check bounces, there are limits on what lenders can do. The lender cannot pursue criminal actions against the borrower. The lender is allowed to demand payment, but costs are capped at the 10 percent fee and a $5 fee for bad checks that the lender might get charged for from their own bank. Payday lenders can only get additional money if they file a lawsuit and the court sees fit to side with the lending company on this matter.

These are just some of the main points of Florida payday lending regulation. Some are pushing for Florida to be the model for the entire nation, while others simply want the CFPB to back off and allow states to decide on their own how to best regulate the short term lending industry. Which solution do you think is the best for your state?

Vets and Military Families Forced to Deal with Debt Collectors and Mortgage Issues

Since the Consumer Financial Protection Bureau is in charge of protecting consumers from financial misdeeds, it should come as no surprise that this group collects and tracks consumer complaints. When all the complaints from consumers are considered for calculations debt collection continues to be the type of issue most often reported to the CFPB. The organization recently released a couple of reports that show which consumers are the most at-risk for these types of issues and the businesses that are involved in debt collections actions.

Going back to March 1st, the CFPB revealed that California, Florida, New York, Texas and Illinois are the states that combine to account for in excess of 40 percent of all the complaints logged since summer of 2011. In Florida almost 60 percent of the complaints from state residents can be traced to three major metro areas – Tampa, Orlando and Miami.

Here is something that is really troubling to a lot of people – military veterans and their families continue to be the most at-risk for debt collection issues. And that is even when compared to the rest of the population. When tabulating the complaints that have been logged by folks in the military community, debt collection issues come in at about 46 percent of all complaints filed by military personnel and/or their immediate family members. If you want to compare this stat with the overall numbers, the CFPB states that these types of complaints account for 26 percent of total complaints collected thus far.

It seems that debt collection issues are not the only concerns that military families have. Mortgage complaints come in second place for complaints logged by this group, at about 15 percent. Many service members find themselves coming home from deployment and have also reported complaints about fraudulent credit report activity and identity theft instances.

So, what kind of companies are responsible for the steady amount of debt collection actions in the United States? The CFPB complaints have indicated that Encore Capital Group, based out of San Diego and Portfolio Recovery Associates, based out of Virginia are two of the biggest debt collection companies in the United States, and they have been mentioned most frequently in complaints logged to the CFPB. Each of these companies were mentioned in more than 100 complaints each month, from October to December of 2015.

Is the CFPB doing anything about all of the complaints it receives? The bureau says that it took enforcement measures against the firms mentioned for actions that include deceptive debt collection practices and debt purchasing. In fact, Portfolio Recovery Associates was fined $8 million and ordered to repay about $19 million to consumers. The company also had to cease collection actions on about $3 million worth of debts. Encore Capital, meanwhile, was ordered to stop their collection efforts on nearly $125 million in debts, to repay consumers $19 million and they also had to pay a hefty $10 million fine.

Since so many people have a vested interest in taking care of military members and their families, it will be interesting to see if the CFPB actually takes any direction action to focus on the unique financial challenges that many military families seem to be dealing with. If there are debt collection agencies out there that are continually targeting military personnel for harassment, for example, then the CFPB needs to step in and use its considerable power to provide a bit of relief for those who have taken it upon themselves to defend this country as a way of life. It really is the right thing to do.

Can Payday Lenders and the CFPB Come to an Understanding?

There are lots of subjects that divide people on a regular basis. Folks who love one form of music, may despise another musical form. Some people think spending time outdoors is amazing, while others don’t like to venture too far from their favorite living room chair. And forget about trying to get conservatives and liberals to agree on much of anything. Another decisive issue that is getting a lot of attention lately is that of short term lending. Some consumer advocates believe that these loans are the worst thing in the world, while others believe that payday lending companies provide a valuable service to their customers. There’s just no reaching a middle ground on some subjects.direct_payday_loans_pros_cons1

Many who fashion themselves as consumer protectors have a deep seated hatred of short term loans, and view the providers of these loans in a bad light. People who tend to favor consumer choice usually believe that grown people in this country are fully capable and allowed to make choices about the types of financial products and services they choose to pay for; even if a loan has expensive fees to pay, these folks believe that everyone should have the freedom of choice to decide on their own.

As far apart as these two groups seem to be, there may actually be some common ground that both sides are not even aware of: They both want consumers to get reasonable access to lines of credit, and expect that those products are priced fairly for the people that use them. Once you get past that basic fact, though, the contention between both sides begins to heat up to a point where some people get downright nasty about the topic.

For example, there are news stories now about how the Consumer Financial Protection Bureau (CFPB) – the most powerful and vociferous of all the groups against payday lending – has been violating the sovereignty of Native American tribes as a part of their efforts to introduce new regulations on the payday lending industry. This industry happens to be a major source of income and employment for some tribes. This is a precarious battle that will likely wage for some time to come.

The Public Affairs Head for Advance American Jamie Fulmer said, “What strikes us is that when the Bureau was established by Professor and now Senator Warren and Director Cordray, there was a lot of talk about the need not to dictate consumer choice but to provide a level playing field across a broad spectrum of financial services companies.” Fulmer went on to note that the financial landscape right now is not so level right now.

In a recent interview Fulmer explained, “Customers are redefining what mainstream customer services are. We think the type of loan we are type of providing falls strongly in the mainstream, because consumers find that they have an increased, yet regular, need for small dollar short-term credit. We believe that was the correct approach and it was rooted in ensuring simplicity, transparency and full and complete and understandable disclosure.”

As to whether or not the CFPB and the major players in the payday lending industry can ever come to an understanding is something that we will all have to wait and see. However, more people – both private citizens and elected officials – are now starting to come out of the woodwork in support of the freedom of financial choice that payday lenders provide to their customers. Proponents of payday lending seem willing to reach common ground; the ball is now in the court of the CFPB.