Question

Payday lenders won a huge victory under the Trump administration Consumer Financial Protection Bureau (CFPB) this week (2-7-2019) with rolling back regulations that benefit the average consumer. It appears that contributing to the Trump campaign is paying off for the big lenders in big ways. Now its back to business as usual; using 400% interest rates to lock in unsuspecting borrowers on long term loans/debt that is difficult to get from under.

Question: The CFPB is funded by our tax payers dollars, which mean that this agency suppose to be working for all citizens of our nation. Do you think rolling back the regulations is a good idea? Would your answer change if you was a Payday loan merchant? Are companies such as payday lenders (who are merely trying to make a profit) being over-regulated or over burden with cumbersome regulations? Do you see any ethical issues involved here? Are consumers being fairly represented by our appointed officials?

Explain why or why not?

Answer 1

Payday Loans targets the customers with low-income and poor and non-existent credit scores. Arguments against payday loans claim that they target and take advantage of vulnerable consumers by charging high interest rates (upto 400 percent) and traps consumers in cycle of debts.So, the CFBP has set up the rules with two primary parts for consumer protection.Firstly, the lenders have to check the ability to pay the debt of the consumers and consumer's authorization to withdraw the money from their bank accounts. But, now the CFBP has rolled back these regulations and delayed it up to next year.

For the consumers, rolling back the regulations is not at all a good idea as this will lead the consumers to get sucked into the debt traps. CFBP announced that it has founded the "ability to pay" requirements would restrict access to credit but in reality this roll back is doing more harm than good to the consumers or middle or low class groups.

Yes, For the Payday loan merchant, it is beneficial. Payday lenders are a booming business in U.S. There are approximately 23000 payday lenders, almost twice the number of McDonald's restaurants. The lenders can make the automatic withdrawals from the consumer account without their permission and will charge the finance charges that cost them more than the original loan.

Payday lenders(who are merely trying to make a profit) are regulated with regulations but in reality they are not over regulated with cumbersome regulations. The regulations are designed to protect the interests of the consumers so that they cannot get exploited by those Payday lenders who are just doing business and make money for their own benefit.