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In July 2020, the Consumer Financial Protection Bureau (CFPB) issued new rules for payday loans in 2020. These new procedures undo some of the 2017 changes that were made to protect low income families, so this is very important!
Payday loans are going to be easier to get and harder to escape.
In 2017, underwriting rules were created to ensure that the people taking out payday loans could actually afford to repay them. This was an attempt to protect low income families from the debt trap that payday loans can create.
Payday lenders no longer have to verify your ability to repay.
As part of these rules, payday lenders were expected to verify a borrower’s ability to pay and limit the loans to what a customer could afford to repay. These are similar to rules for mortgages and credit card companies.
Among other things, payday lenders were required to conduct a full-payment test to ensure that a borrower could afford to repay the loan without borrowing another loan. Lenders were expected to verify that a borrower could afford their living expenses and financial obligations, in addition to the cost of the loan. This is no longer the case.
The 30-Day “Cooling Off” period has been removed.
Another rule that has been stopped is the 30-day cooling off period. Previously, a payday lender could not issue four consecutive loans. After three loans, there was a mandatory 30 day period before another loan could be issued. This is no longer the case.
Subsequent loans can have higher limits.
Under the previous law, you could only have three loans before the 30 day cooling off period went into effect and each loan had to be smaller than the one before it. This is no longer the case.
Payday lenders cannot repeatedly withdraw payments.
Fortunately, the CFPB did decide to keep the restrictions that prevent payday lenders from pulling money directly from a person’s bank account three times. In the past, lenders could repeatedly attempt the withdrawals which could leave low income families wrestling with costly overdraft fees.
However, this rule is currently on hold due to a court order so it cannot currently protect low income families.
Payday loans are dangerous! Borrow responsibly.
Payday loans are very dangerous. They can create a financial death trap for borrowers who are not prepared for the high interest rates and repayment terms.
Be sure to only borrow what you can repay, and be sure to borrow from reputable companies that offer extended payment arrangements if you need them.
If you need a payday loan, I recommend Check Into Cash. They’ll lend up to $2,000 and let you repay over 6-12 months!