When You Should Know When You’re a Predatory Payday Loan: When You Can Sue
The payday loan industry has a reputation for pushing people to buy more than they can afford, but what’s the truth about predatory payday loan loans?
For those who have been in the payday loan business for too long, the answers to these questions might be the biggest takeaway of their entire careers.
The question comes from a study published this week in the Journal of Consumer Affairs, which looks at how predatory payday lenders can get people into the habit of taking out more than their debts can cover.
In a nutshell, predatory payday lending firms are often “predatory payday loan lenders” in the eyes of the law, according to a press release from the study.
That’s because predatory lenders often charge high fees, or charge a “loan-to-value” fee that is so high that it’s essentially a hidden markup.
For instance, in a study conducted by the Consumer Financial Protection Bureau (CFPB), a survey of consumers found that payday lenders charged between $200 and $500 a month in fees for consumers who were struggling financially.
The average fee for the top tier of predatory payday payday loans was $4,200, or $3,700 a month.
That makes predatory payday borrowers who are in financial distress often eligible for loan forgiveness.
For example, a consumer might qualify for a $2,500 loan forgiveness payment, while someone in the top 10% of predatory loans could potentially get as much as $4.6 million in loan forgiveness payments over the course of their career.
These payday loans can also offer higher interest rates than traditional payday loans.
The Consumer Financial Rights Act, which came into effect in the spring of 2016, mandates that payday loans must be federally insured, which can lead to higher interest payments, according the CFPB.
In addition, lenders are required to offer the highest quality services and have the lowest fees.
If the fees are too high, consumers could be steered towards other forms of financial assistance that could lower the overall cost of the loan, which is a potential violation of the consumer rights law.
As the consumer bureau pointed out in its press release, predatory loans can “distort a consumer’s economic and financial situation, making it more difficult to obtain the best possible credit and financing.”
For those consumers who have recently been hurt financially and are still in the process of obtaining loans, these predatory loans are often the most likely to be at the top of their list.
While the CFS Act does require lenders to provide borrowers with access to the services and assistance they need to rebuild their finances, it doesn’t require the lenders to offer loans that are “unreasonably risky,” according to the CBA.
That means the law doesn’t apply to payday loans that don’t make you a victim.
According to the press release: In some cases, a lender may make a loan to someone who’s making more than the borrower is able to pay, for example, because the lender thinks that’s the best bet for the borrower’s creditworthiness.
A lender could then apply a higher interest rate, or even a “zero interest” rate, to the loan.
The CFPBs findings come amid a crackdown on payday lending, which has seen a record number of lawsuits filed against predatory lenders.
The Department of Justice recently announced a new rule that will require all payday lenders to get consumer consent before charging them a fee.
The rule also calls for mandatory disclosures to borrowers about their rights under the Consumer Credit Protection Act, the Consumer Fraud and Abuse Act, and the Fair Debt Collection Practices Act.
These new rules are the first step in the industry’s push to get payday borrowers in line with the law.
According a recent Consumer Reports survey, 60% of payday borrowers are satisfied with their credit.
“Predatory payday lending is not about providing a free meal,” said Mary C. Scott, director of the Office of Consumer Advocacy at the Consumer Federation of America.
“It’s about driving people to take on debts that they can’t pay.
We want to stop predatory payday, but we also want to get them out of debt as soon as possible.”