What has changed?
The Consumer Financial Protection Bureau has laid new rules affecting payday lending to put an end payday debt traps. These rules are made to ensure that people are able to repay their loans in time and don’t have to pay high interest associated with payday loans.
What is the new regulation?
The new regulations contain two categories of loans. One is applicable on a loan of 45 days or less and the other one applies on loan term of more than 45 days both under an annual percentage rate over 36%. Also both these loans repaid from the account of consumer or are secured through consumer’s vehicle.
What will regulations do?
The proposed regulations will apply on lenders which states that they are required to crosscheck the ability of the borrower to repay the loan in time. Any failure or inability to do so will be considered as unfair and abusive practice.
Also it would be considered an unfair and abusive practice to withdraw money for more than 2 times from a consumers account on a covered loan if previous two attempts have failed. He can only make a new transaction only if he has received authorization from the consumer.
payday loans Louisiana
The second regulation is applicable on consumers; the regulation limits the number of rollover loans that a borrower can take in succession.
How to determine the ability of a borrower’s repaying capacity?
The regulation applicable on consumers would assure that consumers make a reasonable determination to repay the loan in time and meet other financial obligations and daily expenses without borrowing money from others over following thirty days.
The regulation of payday loans in Louisiana would require lenders to:
- verify net income of the borrower;
- verify debt obligations of consumer using a national consumer report and “registered information system:
- verify housing costs of the consumer and estimate his housing expenses using a reliable method;
- forecast his basic living expenses (other than housing costs and debt obligations) required for a customer to maintain his health, ability and welfare to produce income
- estimating the net income of consumer, his debt obligations, and other housing costs for the term of the loan;
The lender should take consumers ability to repay in account so that he does not fall into the trap of non-repayment.
These obligations might not make everyone happy but keeping consumers and lenders in mind, the regulations will certainly help the short term loan industry grow further. There are many people who opt for short term loans and are able to repay them by their next paycheck but there are many others who fail to take their other expenses in account and thus end up becoming a defaulter.
Repaying short term loans in time makes customer avoid high rates of interest and also allows them to apply for the loan again if they want in the coming months. It is thus important that is you stay in Louisiana and wish to take payday loan Louisiana; you must comply with the new rules stated by the US government.