According to reports from Reuters published in Consumer Bankruptcy News on March 26, 2015, the United States Consumer Financial Protection Bureau (CFPB) has outlined new plans to crack down on the payday lending industry with a goal of ensuring that borrowers have a reasonable chance to repay their loans. The framework is considered a key step toward new rules for various types of loans that regulators say trap borrowers in debt. Often times filing bankruptcy is the only way to avoid the crushing weight of these debts.
How Do Payday Loans Work?
Payday loans are generally small extensions of credit that borrowers agree to repay in a short time. The name “payday” suggests, for example, repayment when the person receives their next paycheck. Similar small loans which have become widespread are “title” loans in which borrowers use paid-off vehicles as collateral.
Lenders insist they help people who are strapped for cash and could not otherwise obtain credit or borrow such modest amounts. They also promote the fact that obtaining such loans are usually easy, can result in fast money, and involve little paperwork.
Consumer advocates, however, report that borrowers often roll over or refinance loans rather than paying them back. Borrowers incur even more debt due to extraordinarily high-interest rates and fees. This leads to never-ending debt and gives many people no alternative to filing bankruptcy.
Options include requiring such lenders to verify the ability of borrowers to repay such loans, including verifying borrower income. Other regulations being considered would limit how many such loans a person could incur at one time. Another regulation might mandate cheaper repayment options to make it easier for the borrower to pay off their balance.
Such lenders have previously been regulated by state authorities. The new federal regulations, once formally proposed, will trigger a comment period for the public and the lending industry.
Filing Bankruptcy Is a Big Decision
If you or a loved one is trapped under the constricting weight of payday loans, filing bankruptcy might be a viable option. Reach out to one of the bankruptcy lawyers at RGG Law today for more information on your options.