Call them nanny state rules if you want, but regulations on payday lending proposed Thursday by the Consumer Financial Protection Bureau start from ground-level common sense.
The $46 billion payday loan industry motto, “Equal Access, Credit for All,” has grassroots appeal, too. But shouldn’t the ability to repay, to not be trapped in cycles of escalating debt, enter the equation?
That’s where the CFPB’s proposals start. Lenders making high-interest, short-term loans would have to assess the borrower’s income, credit history and ability to repay.
The bureau says more than 80 percent of these loans are rolled over or renewed within two weeks, generating more fees for lenders. More than 70 percent of the loans are for basic expenses, not emergencies.
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There are options in the proposed regulations to skip the repayment test, but loan amounts and renewal options would be limited.
Protests against the proposals are certain, but the freewheeling payday loan business should come under tighter regulation.