Proposed Restrictions On Any Payday Lender

Since you’re reading this, we’re assuming that you already have an idea of what payday loan are or you might have even experienced them yourselves. Because a lot of money is involved here alongside the companies that lend them, it’s heavily regulated by the federal regulators and it’s even mandated by tons of laws. As stated by the Chicago Tribune, there are even more restrictions laid out for payday lenders. Of course this is to protect the borrowers, as they say ‘prevention is better than cure’, it’s better to be sure than to fall for debt traps.

What are the New Restrictions?

The Consumer Financial Protection Bureau proposed these restrictions as a way to tackles two of the most common complaints concerning the payday lending industry. First, they ask that the lending companies perform a ‘full-payment test’ due to the fact that almost all of the available payday loans require a full payment on their due dates. The typical day of payment is two weeks after the transfer of the money. The CFPB basically wants the payday lenders to make sure that the people they’re lending their money to can pay the full amount without needing to renew the loan again and again.



The other requirement is that the lenders should give more warning before attempting to debit the bank account of a borrower, not only that but they wish to restrict the number of times any amount can be debited from that account. Basically, CFPB want to “prevent lenders from succeeding by setting borrowers to fail.”

CFPB also propose the procedure where payday lenders notify the borrowers at least three days before they debit money from the bank account. Other than that, in case that the lender has already made two unsuccessful attempts at debiting any amount then the lender needs to obtain authorization from the same borrower before any further debiting attempt can be made. Studies showed that payday day borrowers have been charged $185 on average due to overdraft fess caused by the failed attempts of lenders in debiting money from their bank accounts.


It’s obvious that these proposed rules will face a lot of opposition from both parties since borrowers will have a more difficult time applying for payday loans. According to one study that they conducted, if these rules would be implemented effectively, 84% of the overall loan volume would decrease and would result to the elimination of the industry.

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