While the regulations for payday loans have been dealt at a state level, some states are still allowed to have them while other states ban them. The regulations are slow when it comes to the federal level. Yet, this may change sooner since the Commission for Federal Trade began to express its interest to such kind of lending system.
As the payday lending industry grows, it continues to capture more interests; however, the majority of it is negative. Most people criticize lenders in their lending practices, also known as the usual charging of higher interest rates to borrowers. Still, most lenders continue to deny these claims, claiming that they only promote responsible lending and responsible borrowing. Lenders said that the industry offers vital services to people who cannot borrow a loan due to bad credit history. Accordingly, the loans remain affordable, especially, for responsible borrowers.
In spite of the claims against them, the payday lending industry continues to grow. In fact, the online lending system becomes the well-known method with regards to these loans. Because of this, the lending industry creates a new kind of market. Lenders are now creating online regulations emphasizing the typical lending regulations. This growth of debatable industry adds more pressure, especially, to those who see it in a negative way.
The payday lending industry, together with other businesses, had experienced lawsuits and further investigations. These are the primary concern of lenders that are not successful in disclosing necessary information like fees and interest rates. Some, on the other hand, are for trying to gather state members that have banned these loans. These lawsuits have been passed at a state level, providing little effects to the industry’s federal regulations.
Yet, a recent Kansas’s lawsuit has changed all that. The lawsuit was approved by the Commission and it has major impacts towards the industry. Basically, the Commission seeks ways to stop lenders from accessing the bank accounts of the borrowers. It is the most common way of lenders to ensure the repayment for what was borrowed. The Commission claims that this method was already banned by the Electronic Funds Transfer Act of 1968.
This lawsuit has devastating impacts on payday lending industries. Taking away the loan provider’s access to the bank accounts will lead to a different regulation that will paralyze the primary mean of lenders in assuring that they will be receiving the necessary repayment for what was borrowed. This entails a higher loss of revenues because these lenders will simply embrace the collection method than repayment through the bank account. With this loss, the payday loan industry will become non-profitable; forcing lending companies to stop their operations. Responsible lenders always take the point of keeping up with the laws regarding the industry in order to guarantee that they abide all regulations.
It’s yet to see how such lawsuit plays out; as well as the possible effects it brings. However, as the industry continues to progress, it will continually receive more inquiries and pressure brought about by critics. It is a common for newer industries; hence, it is as expected. While negative issues continue to rise, it can also be taken as precautions for people who would like to take advantage of it.