Payday lending rule opens doors for CUs
Since its inception seven years ago, the CFPB is often in the news – both good and bad. Though primarily founded to protect consumers from misleading financial services sparked by the mortgage crisis, one of its critical purposes is to curtail predatory lending, and that’s an objective credit unions share in offering products to replace avaricious payday loans. According to an article in CU Insight, the annual numbers are staggering with 12 million Americans signing up for payday loans and spending $9 billion on loan fees.
For some consumers, a payday loan is a financial lifeline that occasionally helps them with emergency medical bills or other unforeseen expenses. For others, it becomes a cycle of increasingly unmanageable debt, taking out multiple payday loans with interest rates as high as 400 percent and sometimes beyond 1,000 percent.
The CFPB has pressed financial institutions to offer better alternatives to high-interest payday loans. Speaking to the Wall Street Journal in February 2016, Richard Cordray said: “I personally believe banks and credit unions can be low-cost providers of small-dollar loans. I think that working with banks and regulators involved, there would and should be an ability for them to offer decent products.”
Read the full article at CU Insight.