Short-Term Credit: Could it Become a Thing of the Past?
Short-term credit is at risk. Anyone relying on payday loans or other short-term loan products risks losing this option. The Consumer Financial Protection Bureau (CFPB) recently submitted 1,300 pages filled with new regulations they want short-term credit lenders to follow.
What Does the CFPB Want to Do?
The biggest change is that the CFPB wants all short-term loan companies to investigate a borrower’s credit report and use the information there and on paycheck stubs to determine if the borrower meets loan-to-income ratios. If there’s question on a borrower’s ability, the lender must deny this loan or drop the loan amount to make sure the loan meets new requirements.
Essentially, this means anyone with bad credit or a history of missing payments could be denied. The very idea of getting cash in a hurry would end. Short-term loan companies would have to take loan applications, send them to a team who then does the math and scours a credit report, and wait for a decision on if the loan is approved or not. It puts short-term credit at risk of taking days or weeks to get an answer.
Essentially, the organization is basing this bill off the percentage of people who do not read the fine print or understand their responsibilities when taking out a short-term loan. Only 1.5 percent of payday loan borrowers filed a complaint in May 2016, but the remaining 98.5 will lose out because of the small percentage. Responsible borrowers face the risk of having to apply for loans in a more traditional, time-consuming manner.
How Can You Protect Your Rights?
Visit your local short-term lender and tell them you want to send a letter to the regulators to stop this from happening. The second option is to visit CreditStrengthensCommunities.com and click “Take Action.” Tell the government that you use short-term loans responsibly and do not want to face financial hardship because of a very tiny percent of borrowers.