The House Financial Services subcommittee is preparing to legalize payday loans with a 391% interest rate. This subcommittee is in charge of consumer credit issues with Luiz Gutierrez as the chairman.
Gutierrez now has a “power” plan that is suppose to help the payday loan industry. However, many of it’s provisions would be detrimental for payday loan companies. Critics of the payday loan industry say that the industry is “pretending” to oppose his bill. I do believe that, in this case, the opposition is sincere and warranted.
The bill contains regulations that are extremely stringent. The basic aspects of the measure include capping the annual interest rate for payday loans at 391 percent, ban “rollovers”-which allows the borrower who can’t afford to pay off the loan to renew the extend the loan with a fee. The proposal would also prevent payday lenders from suing borrowers who don’t pay back their debts, or garnishing wages from the borrower to collect the debt.
That last point of not being able to take the appropriate measures to collect the money that is owed is, by itself, very reasonable grounds to oppose the measure. If that were to pass,it would essentially be impossible for payday lenders to collect any of the money they lend.
The current proposals for regulating payday loan companies are very flawed, with regulations that would cause the complete elimination of payday loan companies. In order to regulate this industry appropriately, there needs to be a bit of compromise from those who are “protecting” consumers. Payday loans are a valid and essential resource for those needing short-term loans. Hopefully there will be an appropriate and fair resolution.
