Payday loans sioux city - Danbury

Contrary to what many people might otherwise believe, the payday loan industry is in fact highly regulated. The problem lies in the fact that existing regulations (mostly) haven’t kept pace with shady business practices, don’t necessarily end up with the results that people want, and often are just not crafted well.,To conclude, and to actually answer the question, I’ll talk about some of the truly questionable practices from payday lenders and how regulation can (and probably ought) to be used to address them… but also talk about the limits of legislation. Note that none of this should be construed as legal advice.,The payday lending industry, controversial as it is, is not a stranger to regulation.
All lending in the United States, for example, is regulated by the Equal Credit Opportunity Act (ECOA), a Civil Rights-era law that makes it unlawful for any creditor to take into account race, color, gender, religion, national origin, marital status, age, and whether income comes from public assistance programs when underwriting loans. This is a law that was intended to end the de facto discrimination against minorities - primarily black people - who wanted to take out mortgages.

In general the protections to all classes covered by ECOA are taken very seriously today.,In addition, the US has one major Federal usury law, the Military Lending Act (MLA), which specifically prohibits offering loans above 36% interest to active duty military personnel or their spouses, as well as banning certain practices like early repayment fees. (For this reason, the vast majority of small dollar lenders, including my company, cannot lend to active duty military personnel or their spouses.),For nationally chartered businesses, there is some degree of legal grey area here that is only recently starting to be resolved. Theoretically, the same SCOTUS case that authorizes credit card and mortgage lending nationally for Federally chartered banks could also be construed to allow payday lenders, especially online payday lenders, to incorporate in lax regulatory jurisdictions (certain states, areas under Tribal law, etc.) and to lend nationally. In practice, this legal theory isn’t doing too well.,The truth is that legally, payday lending on a national level, and especially over the internet, has basically been the Wild West over the past decade or so.

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Dubious legal theories and regulatory grey areas have allowed a whole ecosystem of online lenders to appear like mushrooms overnight, and then fold when they receive regulatory challenges. Now that legal authorities are cracking down, this era is probably going to change drastically.,However, most traditional payday lenders obey national and state regulation. More comprehensive federal regulation was proposed last year by the CFPB, but is unlikely to move forward in the current regulatory climate.,Outside of these laws, in the US most regulation is concentrated at the state and municipal level. All 50 states of the union in the United States have some form of payday lending regulation, some of them in some unexpected places. There are broadly three regulatory regimes that you can expect to see:,To an extent, this regulatory structure makes some degree of sense.

Since the majority of the cost of lending a small dollar loan is actually the fixed cost of underwriting, charging a broker and underwriting fee allows this cost to be defrayed while still obeying usury laws. On the other hand, there is no obligation for the broker to charge at cost. Functionally this allows for virtually unlimited interest rates, subject only to consumer protection laws that require basic due diligence on the consumer’s ability to pay.,Yes, this is a perennial cry of payday loan lobbyists, but there is a kernel of truth in that many regulators and consumer advocates have very little idea of the limitations that are inherent in the business as it exists now.

Moreover, regulations designed to control loan costs can and do have the effect of forcing lenders to tighten their underwriting, restricting credit to higher risk borrowers. Finally, certain regulatory requirements, like ones for assessing income and spending, are much easier said than done.

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