A new ruling on payday loans by the Consumer Financial Protection Bureau could affect Hoosiers.
The CFPD decision lays out two avenues to protect consumers. One is to assess the borrower’s ability to repay the loan prior to issuing the money. The second allows a shorter series of loans that puts more limitations on the amount of loans a borrower can take. It also requires that those loan amounts decrease if the person is a repeat borrower.
Payday loans are typically sold to people as a solution to a financial shortfall. According to the Indiana Institute for Working Families, Hoosiers and their communities lose about $70 million a year in payday loan fees and 82 percent of payday loan borrowers borrow another loan within 30 days of paying off the first.
Mary Lee McKenzie took a pay day loan after she fell behind on her bills. She has a college education and a longtime job but also has been divorced for 16 years and does not have a steady child support.
“The business has become a lifetime ball and chain that will drag a person into a worse financial situation then they were the day before. I personally couldn’t have gotten out of this cash advance cycle unless it was someone who cared enough and lent me the money to get out,” McKenzie says.
Erin Macey, a policy analyst for the IIWF, says she anticipates an intense battle in the courtroom before the ruling effects Hoosiers.
“There’s rumors there will be a lawsuit to try to stop it. The House has taken some votes in the past to strip the CFPD of the authority to regulate payday lenders, so we’re worried that they may use the Congressional Review Act to rule this rule back,” Macey says.
Lawsuit or not, the ruling will take at least 21 months before it goes into effect.