States Sharpen Payday-Loan Scrutiny

September 26, 2013
Wall Street Journal 
payday lending news

State regulators are trying to rein in payday loans by pressuring lenders to submit customer information to state databases. Alabama became the most recent state to call for a database, following similar proposals in California, Pennsylvania, and other areas. Thirteen additional states, including Illinois and Florida, already have payday loan databases in place. These states require lenders to check the databases to ensure that borrowers are eligible to receive new loans as per laws that limit the amount of loans they can take out at once. Veritec Solutions LLC develops and manages the databases and also operates call centers to which lenders can refer customers that have been denied loans. Fifteen other states, including New York, have abolished payday loans altogether. Typically, the advance must be repaid within two weeks to 30 days and has an average size of $375, according to Pew Charitable Trusts.

The federal Consumer Financial Protection Bureau, which began supervising payday lenders last year, is now considering whether to issue its own rules for the products. The industry has argued that the databases come with costs that result in less money to lend to customers, who alternatively might seek out unlicensed lenders that charge even higher rates. Uriah King, vice president of state policy for the Center for Responsible Lending, pointed out that, in some states with databases, payday lenders have been allowed to add extra fees to cover the costs of using the systems.

Abstract News © Copyright 2008-2013 INFORMATION, INC.
Powered by Information, Inc.

Stay Updated

Join the fight against predatory lending. Enter your e-mail to sign up for breaking news, action alerts, and CRL's original research.

   Please leave this field empty

Help Us End Predatory Lending

Predatory lending destroys family wealth, and preys on our most vulnerable communities. You can help us end abusive lending practices by donating to CRL, or by sharing our work with others.