How to pay off your debt with payday loans
The most common way to pay for a loan with a payday loan is by signing up for a credit card.
But the practice is now being challenged in court, with the latest legal action to be filed on Friday.
The federal Consumer Financial Protection Bureau (CFPB) is currently seeking to overturn a federal court ruling that struck down a regulation on payday lending, which requires that payday lenders provide consumers with information about their financial status.
The bureau argued in its lawsuit that the rule violates the federal Fair Credit Reporting Act (FCRA), which protects consumers against false statements made to them about their creditworthiness.
The CFPB said in its complaint that it has received thousands of complaints about payday lenders over the past year, which have “produced many consumers who did not receive credit reports that accurately reflect their credit worthiness.”
“Consumers have no idea how much their loans may have cost,” the agency wrote.
“While consumers may think they are being protected from predatory lending, in fact, they are often paying hundreds of dollars in interest or fees on their loans, making them the victims of predatory lending.”CFPBS lawyer Jeffrey Rosenbaum said the bureau’s complaint has been filed in the US District Court for the District of Columbia.
“The CBA, through its enforcement activities, has worked to stop payday lenders from charging consumers interest or charges on their credit scores,” Rosenbaum wrote in a blog post.
The CFEB lawsuit contends that the payday lending rule “seeks to unfairly and unnecessarily burden the financial security of consumers by imposing additional financial burdens on consumers who are not directly impacted by the proposed regulation.””
Under the FCRA, consumers have no way to know how much of their credit card or credit card interest, fees, or penalties are due or how much they owe to payday lenders.”
The CFEB lawsuit contends that the payday lending rule “seeks to unfairly and unnecessarily burden the financial security of consumers by imposing additional financial burdens on consumers who are not directly impacted by the proposed regulation.”
In a written response to the CFPBS complaint, the Department of Justice (DOJ) defended the payday loan rule, saying that it is not a “deceptive” or “unfair” regulation that will “increase the likelihood that payday loans will be offered to consumers with the financial assistance they need to pay their debts.”
“As with any consumer protection regulation, the FCMA is designed to promote a level playing field and protect consumers against predatory lending and predatory behavior,” DOJ spokesperson Jennifer Heng said in a statement.
“CFPBs regulatory efforts to address the payday-lending problem do not infringe on the right to free speech protected by the First Amendment.”
Payday loans have been on the rise in the United States in recent years, with lenders adding new options to consumers’ credit cards in response to tighter regulation.
In the last six months, consumers are now using more than 50 million cards, up from about 20 million last year.
According to the DOJ, more than half of all consumer debt is owed to payday borrowers.
The Justice Department has filed several lawsuits in recent months to fight the payday loans regulation, including a lawsuit brought by the National Association of Consumer Advocates (NACAA) and the National Coalition of Consumer Organizations (NCCA).
In April, the NACAA announced that it was filing a lawsuit against the Federal Trade Commission (FTC) over the payday lenders rule.
In March, the FTC announced that the bureau was seeking to stop the payday lender rule from taking effect, after a judge ruled that the agency had exceeded its authority by attempting to preempt state laws on payday loans.
In May, the DOJ announced it was seeking injunctions against several payday loan companies in order to halt the rule.