New Rules Could Dramatically Alter the Payday Loan Market

Link to original source journal subscription may be required for access Morganand caps on maximum loan amounts or interest rates may decrease use of other high cost, short-term credit resources such as pawn shops McKernanZinman J. Payday loan regulations vary by state. Bytwelve million people were taking out a payday loan each year. BoxCharleston, WV The effect is in the opposite direction for military personnel.

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I Applied For An Online Payday Loan. Here's What Happened Next

 · This page contains a summary and chart showing state by state payday lending statues and laws by loan amount, loan term and finance /  · A payday loan (also called a payday advance, salary loan, payroll loan, small dollar loan, short term, or cash advance loan) is a small, short-term unsecured loan, "regardless of whether repayment of loans is linked to a borrower's payday."  · Fee Regulations; Freedom of Information Act Contacts; Frequently Asked Questions (FAQ) FTC has also filed recent actions against scammers that contact consumers in an attempt to collect fake “phantom” payday loan debts that consumers do not owe. Online Payday Lending Companies to Pay $21 Million to Settle Federal /consumer-finance/payday-lending.

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Box Juneau AK Box Montgomery AL Denver CO , The regulator is the D. Department of Insurance, Securities and Banking. Call the center at Gaines Street, Tallahassee FL Telephone - This is the main government entity in the region that protects borrowers. Beretania Street, Honolulu HI , Laws are put into place from the regulator, which is the Iowa Division of Banking Address: Idaho Department of Finance is the regulator.

Call the office at Washington, Springfield IL Indiana Department of Financial Institutions Address: Box Baton Rouge LA , Maine Office of Consumer Credit Regulation sets rules and laws for the state.

Box Lansing MI Telephone - Box , W. Main phone - West Street Jackson MS For information on payday regulations, dial Box , Lincoln NE For information on laws and rules, or to complain, dial Oklahoma Department of Consumer Credit Address: Second Street, Harrisburg PA Box Columbia SC The Clean Water Act, for example, set a nationwide floor for pollution standards, while allowing states to impose more stringent requirements on polluters by ratcheting up state standards above the federal floor.

For payday loans, the CFPB rule will likewise set minimum standards for lenders, while allowing states to impose more stringent requirements. Lenders in permissive states may continue to lend to borrowers in restrictive states in violation of state law.

But the federal rule will mitigate the worst effects of this practice, ensuring that borrowers in restrictive states receive a minimum level of consumer protection when out-of-state lenders reach across state lines.

Going forward, lenders nationwide will need to determine that a consumer has the ability to repay a payday loan before issuing it and must also provide advance notice to borrowers before trying to withdraw funds from their bank accounts.

The strongest argument against a federal regulatory floor is that it will stifle state-level innovation in regulating small-dollar loans. Preserving this state function is a laudable goal.

But even this argument has serious weaknesses. The federal rules, as proposed, do not prevent state innovation. Rather, they push innovation into the space above the federal floor.

Permissive states will remain free to experiment so long as they do not contradict federal standards. Meanwhile, restrictive states may rest easier knowing that out-of-state loans made to their residents will meet minimum standards for borrower protection.

Federal regulation can provide a backstop for states that seek to protect their residents from what they view as predatory loans, setting a nationwide regulatory floor backed by federal enforcement resources. But until the government addresses the causes of household financial fragility that fuel demand for payday loans, the best it can do is to regulate the supply.

Made by History Analysis Analysis Interpretation of the news based on evidence, including data, as well as anticipating how events might unfold based on past events. Why the federal government must intervene to limit predatory lending.

Anne Fleming is an associate professor of law at Georgetown University and the author of " City of Debtors: A Century of Fringe Finance ," forthcoming in January The story must be told.