AboutPaydayLoans – In the aftermath of the subprime mortgage collapse, a new agency emerges with the initial goal of overseeing nearly all aspects of consumer finance in order to regulate and hopefully prevent another economic crisis.  This new Consumer Financial Protection Bureau (CFPB), which was originally proposed to be a stand-alone “agency” as opposed to the approved bureau which lacks the same enforcement authority, is still going to change the current landscape of consumer credit options in more ways than we can currently predict.

For example, small auto-dealerships who offer finance options to their customers were originally set to be regulated by this new agency, but a strong push by auto industry lobbyists was successful in securing a “carve-out” to exempt over 18,000 auto dealers from the regulatory reach of the CFPB.  Many opposed this loophole, yet after much debate the auto industry secured a victory by dodging this new regulation.

Some financial analysts argue that although these new regulations are meant to protect consumers from “tricky” financial terms and language, the real effect of new regulation will actually lead to many smaller businesses pulling their finance options from the sales floor, leaving many consumers with no options to finance their children’s braces or a cheap used car to get to work.  Many project that this will not only lead to thousands of job losses in industries such as auto sales and payday lending, but will ultimately harm consumers by limiting their already slim selection of small short-term credit options as opposed to “protecting” them from these finance options.  Most of these finance options are already required by law to ensure that all terms of the loan are fully disclosed.

One industry that did not receive the benefit of an exemption is the payday loan industry.  Payday loans are aimed at giving those with bad credit to obtain a short-term loan to help out when they need finance until their next paycheck, and many companies such as Paydayloanjr.com are direct payday lenders, who lend responsibly and honestly.  Paycheck advance loans are already regulated by State laws, but will now be regulated by the CFPB but still enforced at the State level, which is a top headline in current  payday loan news for lenders all across America.

One interesting point of this new regulation is that the Treasury has been given orders to create a new program that will attempt to provide loans for the unbanked, or those who currently have no credit options other than a payday loan, which does require you to have a bank account.  It will certainly be interesting to see how this will be setup, and what APR’s will be applied in order to cover loan defaults.

Regardless of the goals of this new reform we will certainly be seeing the impact of the CFPB for years to come, across many industries.  We all hope this will actually benefit consumers and our economy in the long run.

Apparently many payday lenders in Arizona that wanted to change strategy and business model to other type of similar businesses such as check cashing or etc have decided to call it quite. According to the Arizona Republic, most payday lenders were not fast enough to merge their businesses to other type of businesses such as auto title loans or they wouldn’t be able to do it fast enough or found it too competitive to get into so This Wednesday will be their last day of their operation.

Many online payday advance loan lenders like Paydayloanjr.com have already stopped giving out payday loans to State of Arizona from months ago.

Thousands of jobs in State of Arizona will be lost as result of this new payday loan ban in State of Arizona.

According to Payday Pundit, CFPB which is apparently an agency of Federal reserve will not make rules about payday loans and States will follow and enforce them:

payday lending will be regulated by the CFPB, which will be housed at the Federal Reserve. (We preferred this to an independent Agency. )   Also, the CFPB will just make the rules, enforcement will be done at the state level.   There is also a provision that requires the CFPB to meet with small businesses before it begins the regulatory process.  We supported this strongly.

More on this next week (hopefully)

Let imagine for a moment that you are one of millions of Americans who are currently employed, yet feeling the strain of our current economic status.

Perhaps you work full time, and the wages aren’t bad, but as it stands currently you haven’t gotten far enough ahead to save up enough money to feel completely secure.  And even though you may be making good money, the utility bills, rent, food, car insurance, college bills and more seem to be just enough that you’re working just to keep your head above water.

Last month, you had over $2,000 in your savings, but an unexpected toothache sent you to the dentist, and then the orthodontist which wasn’t covered on your plan.  Cost to you, $1,000.

Earlier this month, your transmission suddenly went out on your gently used car.  Of course it’s not under warranty anymore, so there’s another $1,000 out of pocket!  But you had to get that car back on the road to get to work, not to mention pay for a few cabs in the meanwhile!

Now it’s nearing the end of the month but it’s still 5 days from payday, and now you’re looking at a cell phone bill, electric AND car insurance all due in right before your paycheck hits your bank account!!

This is where “responsible” decision making comes in, because you have several options.

- Pay your bills late, on your payday

But, you’ll be looking at 3 separate late fees, a possible “re-connect” fee on your cell phone plan, and what if you get in an accident while your car insurance has lapsed?  Doesn’t sound like a responsible decision to me!

- Overdraft your account to pay your bills

But, although you’re hoping to consolidate your “fees” to just that one overdraft, if you have been using that debit card elsewhere, chances are the bank will “arrange” the charges to reflect not only that overdraft, but several other charges which just “happen” to fall in such a pattern (not in the order they were charged of course!) that maximizes the potential for multiple overdraft fees.  Risky, but it could save you money OR cost a ton on overdrafts!

- A one-time payday advance loan

At least in this case, you’ll have ONE clearly defined charge, as long as you responsibly pay the loan back on time.  Sounds like, when used properly, a payday loan can be a very responsible decision to obtain finance, and avoid other more costly charges.

I think the key word here is responsibility.  If you take out a loan to help your finances, you need to stick to your plans and pay it back on time to avoid charges, just like your bills.

AboutPaydayLoan.com – Governor of Illinois, Pat Quinn, today signed Illinois House Bill 537 into law which puts a cap on payday loans and curbs payday lending. Under this new law, interest rates payday lenders charge will be capped at 99% for loans under $4,000 and 36% for loans greater than $4,000.

The monthly gross income of a payday consumer in Illinois is about $30,460 per year . Only 4% of payday day loan customers make more than $70,000 per year.

In a statement Pat Quinn said:

“Many consumers who take out short-term loans are doing so as a last resort to pay their bills and provide for their families. It is all too easy for lenders to take advantage of them by raising interest rates and setting very short repayment periods. It is important that we do everything we can to protect these consumers who are already hurting, by helping to make these loans more affordable.”

Here are some of the highlights of the Law

- Loans and their amount should be approved only based upon the borrower’s ability to repay the loan.
- Consumers are to be given monthly payments that does not exceed 22.5 percent of their gross monthly incoming.
- Customers have at least 6 months to pay back the loan term. This is a 2 months increase from previous four months term.
- “Balloon Payments” which are payments that prevent lenders from penalizing borrowers for early pay offs will also be banned.

As an advocate for responsible payday lending, About Payday Loans welcomes these new regulations to help end predatory lending. Nevertheless, About Payday Loans would like to encourage law makers to not only introduce caps and laws to regulate the payday loan industry, but to also teach consumers better monetary habits so they can avoid payday loans altogether. Regulating the payday loan industry with interest caps, along with creating a learning environment, promotes responsible lending, it is the most optimal solution, so that good payday advance lenders and trusted payday lenders can continue doing business as usual. After all, many of these lenders are legitimate businesses that provide jobs, pay their taxes, and contribute to the economy.

Continuous education of payday loans to the consumer should also be on the agenda. Remember, knowing is half the battle. Moreover, the finger should not always be pointed at payday lenders for financial problems this country is facing, consumers who take unnecessary loans for amounts they cannot afford should also be held responsible. There are plenty of payday loan resources out there, such as payday loan blogs, that consumers can read to help them determine the risks of payday advance loans, and when it’s a good time, and not a good time, to apply for a online payday loans.

Governor of Illinois Pat Quinn today signed Illinois House Bill 537 into law which puts a cap on payday loans and curbs payday lending.

In a comment he said

” Many consumers who take out short-term loans are doing so as a last resort to pay their bills and provide for their families. It is all too easy for lenders to take advantage of them by raising interest rates and setting very short repayment periods,” said Governor Quinn. “It is important that we do everything we can to protect these consumers who are already hurting, by helping to make these loans more affordable.”

As an advocate for responsible payday lending, we at About Payday Loans believe such limitations and caps will only reduce payday lending competition  as many smaller but good payday advance lenders will be out of business hence the jobs they provided will vanish along with taxes they paid or any other contribution they had to the State’s economy.

If politicians really want to promote more affordable short term loans, they can do so by encouraging lenders voluntarily reducing their own fees,  and by giving lenders tax insensitive and other and more open regulations that would make payday loans less expensive.  (such as more realistic collection laws)

AboutPaydayLoan.com – Currently there is a battle taking place in Washington, D.C. over a new financial reform bill, which aims to “clean up” the economic mess left over from the wake of our subprime mortgage collapse and to also prevent a second economic crisis.  At least that’s what we are being told by Senators such as Chris Dodd (D. Connecticut) who are heading up this recent push for financial reform.

According to Senator Dodd, this financial reform bill is necessary to prevent another economic crisis, as well as to protect consumers from confusing and misleading financial jargon when dealing with products that offer even short-term consumer finance.   If approved, Senator Dodd aims to create a powerful new agency to oversee these new financial regulations, the Consumer Financial Protection Agency (CFPA) which would be a stand-alone government agency with a vast reach of power to regulate consumer financial products from auto-loans to local furniture stores that offer in-house finance options.  Many are pushing for the CFPA to be housed under the existing Treasury office, as to help curb the seemingly endless breadth of reach that the stand-alone CFPA would wield if given the opportunity to stand outside of the Treasury department.

Although many of our Senators are pushing this financial regulation as the only logical means to preventing another economic crisis, there are many skeptics who feel otherwise and claim that stricter financial regulations may in fact harm our economy more than it will help in the long run.  One reason for this is the potential for thousands of job-losses due to these new stricter regulations.  Many small businesses, such as your family dentist or even a local used car sales lot, who offer simple “in-house” (“in-house” meaning that the customer can apply for financing from an outsourced lender while still in the dentist’s office, auto sales lot, etc.) financing options will potentially face new confusing, and more strict financial regulations.

Even small loans such as a payday loan, offered by experienced and responsible direct payday lenders such as Paydayloanjr.com, will possible fall under the new regulations.  Many economists predict that eliminating consumer short-term credit options such as paycheck advance loans that will actually harm the economy, as shows in reports from states that have banned payday lending in past years.

Many businesses are already reporting that they will be forced to simply abandon these finance options, rather than bear the increased legal fees and more that they would face in order to keep their financing options available and stay current with the legal changes to contracts and more.  And by eliminating these finance options, which help drive sales and make purchases possible for lower-income working families, many predict massive job losses to several industries in the backlash of this new legislations.  Most of these industries also had absolutely nothing to do with our current economic crisis yet face the reality of strict new enforcements to their industry, but consumer demand for credit options will not change regardless.

The payday loan industry is one of the fastest growing industries in the country. As Americans’ paychecks getting less and their living expenses getting more, more Americans are taking payday advance loans.

But as the industry grows so are its foes. There was a good article on how some payday lenders may fear federal regulation that author, in my opinion, does a good job by a well balanced reporting.

As a payday loan resource, we at About Payday Loans find it necessary to indicate that if some arguments against the payday lenders hold water. Some payday lenders, in particular those that are affiliates or brokers, may give false promises, sell their customers’ information without their permission, and charge hidden fees. But does existence of a few bad lenders or brokers that make the entire payday lending industry bad?

The answer is simple, NO. Payday advance loans are in demand by consumers and they should exist. But that is why payday loan resources like us exist that recommend borrowers  do their research end only take payday loans from trusted payday lenders. Make sure you take your loans from a direct payday lender when it is possible.

Read all the fine notes and do bother to call in if you are taking an online payday advance and ask any questions you have from that payday lender. Actual payday lenders should have a live customer service center that are there to answer your questions over the phone at least during the business hour so make sure you look for that also.

State legislators are forming a strong opposition against the payday loan industry. This, in turn, is making it very difficult for direct payday lenders to become profitable businesses. Many States don’t allow their residents to get a payday advance loan or have strict regulations that prevent lenders from assisting customers with short term cash needs. As a result, residents of the State are the ones being hurt the most.

Today’s bad economy and credit crunch does not leave too many options for Americans that are looking for a short term loan. United States unemployment remains above 10% and underemployment is a growing national problem. As a result, many Americans are living paycheck to paycheck and find it difficult to make it to their next payday. Citizens are watching their paychecks get smaller while cost of living continues to rise. The need for short term lending options have never been higher, people need a way to pay off their car note or upcoming rent when they are short on cash.

There are other short term loan solutions available but customers have less of a risk when they take a payday loan, when compared to the consequences of other types of loans if they are to default. One other type of short term loan is a title loan, with this type of loan the customer risks losing their car or home if they default. With a payday loan that is not the case, and with our economic state more payday lenders are open to work out flexible payment plans with their customers.

True, payday loans are expensive but that is mainly because of high tax rates and insurance costs put onto payday lenders. Payday lenders are not trying to prey on people who are in a financial emergency by charging high rates, the reason they have such high rates is to make up for the huge loss they take from customers who default. Apart from that, payday lenders are just like any other business and have business expenses such as property rent, payroll and operation costs.

All of these factors make payday loans expensive, but payday loans are necessary, especially in our current economy where cash flow is a big issue. If the government continues to increase taxes, put caps on payday lender fees, and limit or restrict operations, it will hurt payday lenders and eventually hurt the consumers.

A good payday loan resource, About Payday Loans, advocates responsible lending and calls on State legislators to ease legislature on payday lending. The State, in turn, should promote responsible lending so consumers have more options to create competition among payday lenders, which will naturally regulate the market and benefit the consumer.

In an article, About Payday Loans claims that regulations and caps will eliminate competition among lenders, this will eliminate smaller lenders and leaving consumers in the hands of a monopolistic market. Instead of making rules that will eliminate the smaller lenders, it would be more effective to promote competition so lenders can naturally regulate themselves, and eventually lead to affordable payday loans for the consumer and responsible lending.

We’ve already discussed ways to help you find the right lender as well as other options to payday loans when you need quick cash.   Now it’s time for us to take a look at reasons and situations when you should not use a payday loan to help out your financial situation.

First and foremost, a payday loan is generally described as “a short term loan, usually 1 month or less, which is set to be paid back in full on the customer’s next payday”

Payday loans by nature, mainly due to the charges and costs associated with the loan for both the borrower and the lender, are specifically designed to be used in cases of a short-term cash emergency.  When used outside of these suggested guidelines, the borrower is usually attempting to solve a long term financial issue with a short-term financial solution, kind of like trying to fix a bullet wound with a band aid!  After all, a long term financial problem needs long term solutions, such as changing your budget or re-financing/consolidating credit card payments and in some cases even bankruptcy.  These long term issues will almost never be solved with a short-term loan, and these types of borrowers are most likely to default on the loan or “renew/rollover” the loan into another loan which puts them even deeper into debt for just a quick bit of financial relief.   In most cases someone like this who is taking out a payday loan is in a “hopeless” state, and they aren’t really using a payday loan responsibly to pay off a bill or avoid a more expensive charge elsewhere, as payday loans are intended to be used.

Just remember to follow these guidelines when you need cash and are considering a payday loan as an option…

-Look around for other options before rushing off to take out a loan

-Make sure you’re using a payday loan to assist on a short-term financial situation, such as to pay a bill on time and avoid more costly charges, only until payday

-Do the math, and make certain that you can and will pay the loan back when agreed upon, to avoid fees or rollovers

-Never use a payday loan to “help” with a long-term financial problem, because most likely it will end up hurting you more in the long-run.