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New Payday Lending Rules Called "Long Overdue"

About 12 million Americans borrow cash from a payday lender each year. (cohdra/morguefile)
About 12 million Americans borrow cash from a payday lender each year. (cohdra/morguefile)
June 3, 2016

LANSING, Mich. -- Measures to rein in the payday-lending industry are being called "long overdue" by supporters in Michigan. It's the first time the Consumer Financial Protection Bureau has proposed rules to regulate the small-dollar loan industry, which charges interest rates of more than 300 percent in some cases.

Bishop Herman Starks of Christ T.R.U.T.H. International Ministries of Deliverance contended that it's taken far too long for the rules to be drafted. He said he has counseled many parishioners devastated by predatory lending, including one who had even considered suicide.

"She had got caught up in the debt trap and couldn't deal with the pressures," he said. "I look forward to telling her that there are finally rules in place, that there's some form of fairness that is coming into the land."

The payday-lending industry has maintained that the proposed rules would be a blow to consumers by limiting credit for those who use payday loans to cover unexpected expenses or a budget shortfall. An estimated 12 million Americans a year borrow from payday lenders.

Perry Green, 30, said he's among those who have been caught up in the so-called "debt trap" after taking out a small loan. He said he didn't have enough cash to pay his rent and needed a short-term solution -- but with his student loan and other debts, Green said, one payday loan turned into many.

"It was frustrating to keep going back, because I would need to continue to borrow for those expenses, and it turned into an endless cycle of borrowing," he said. "I spent almost $1,000 on fees and interest alone, although I originally just needed to borrow $300."

Under the new rules, lenders would need to verify their customers' incomes to confirm their ability to repay a loan. Also, the number of times a loan could be rolled over into a new loan would be curbed. The Consumer Financial Protection Bureau is taking public comments on the proposed rules through this fall.

The rules are online at files.consumerfinance.gov.

Mary Kuhlman, Public News Service - MI