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Most Americans Favor Payday Loan Reforms

 Payday loans are costly because companies who issue the loans tend to be the lender of last resort. These are low value, short term loans, typically from the unbanked. Rates are high but so is the risk. The channel is under persistant regulatory scrutiny .

• two new reports show that most people do think it’s time to rein in payday lending and provide more affordable loan options for borrowers in need.

• The CFPB offers four protections to end debt traps: a test that companies must perform before extending credit; restrictions on rollovers; a payoff option for some products; and offering less-risky lending options.

The article suggests that 70% of those surveyed by Pew Research, a highly respected non-profit, want to increase regulation.
• Payday Loan Customers Want More Protections,” supports requiring installment payment structures that would allow them to have several months to repay debts in smaller installment amounts.

• The report, based on a survey of 826 borrowers, found that other reform priorities included lower prices, affordable payments, and being able to obtain small loans from banks and credit unions, not store front businesses.

So watch what happens to the market. Chargeoffs still sit at rates 5-times the credit card norms. Rates get slashed. Lenders leave. No viable option. No loans.

But be careful of what you ask for.

Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group

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