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Reining in the Payday Loan Industry
Earlier this month, the Consumer Financial Protection Bureau (CFPB) announced new rules to reform payday lending and auto title loans. These rules are a welcome development for an industry that for far too long has recklessly taken advantage of working families, trapping them in endless cycles of debt that few have been able to overcome. They also pave the way to expand options for consumers and ensure they are able to secure a safe, affordable loan that doesn’t break the bank in the process.
For years, there were few places for low-income individuals and families to go when they needed immediate access to cash for emergencies. The Federal Reserve recently found that half of U.S. households would have trouble paying for emergency expenses of $400. With few options these borrowers go to payday lenders, who have nearly monopolized the market. Payday lenders lure in potential customers with the promise of reasonable interest rates, only to lock borrowers in to a cycle of repeated borrowing to pay for previous loans.