New Rules Could Hurt Low-Income Consumers



Dallas, TX (Date) – A payday loan or cash advance is a short-term, small-dollar, high-risk, high-cost loan. In order to obtain a payday loan, a borrower goes to a payday store, presents proof of income, such as payroll deposit advice, writes a postdated check to the lender for the principal plus fees and leaves the store with cash. New regulations proposed by the Consumer Financial Protection Bureau would limit credit options and damage the lifestyle of low-income consumers, argues Kathryn A. Reed in a new study by the National Center for Policy Analysis.

“The proposed payday lending rules are heavy handed, particularly coming from an agency whose authority has been subject to scrutiny by the courts.” says NCPA Senior Fellow, Pamela Villarreal.

New Payday Lending regulations would hurt credit access:

  • The proposed rules have some good elements, such as requiring the lender to notify someone before debiting their bank account.
  • But there are also requirements that would encourage the consolidation of lenders and reduce the geographical supply of lenders.
  • As a result, consumers with no alternative forms of credit could be forced into bankruptcy.

“Whether policymakers like it or not, there exists a need for payday lenders.  For many moderate-income and low-income borrowers, there is no other alternative for a quick loan other than going into bankruptcy,” says Villarreal.

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