Payday Lenders Unfairly Targeted by New Reform Bill

HOUSTON, May 13 /PRNewswire/ -- Proposed financial reform bills currently in Congress may result in creation of a new agency called CFPA intended to regulate the financial industry to prevent a similar financial meltdown that had resulted in the economic crisis of 2008.  However, these bills may be unfairly targeting businesses and hampering their contribution to the economy.

An industry being unfairly regulated is the payday loan industry and direct payday lenders.  Some argue that payday advance lenders were one of the few financial institutions that contributed positively to the economy by allowing cash flow to the average working family.

"Payday advance loans  are the easiest and fastest loans to obtain especially during these hard  times, but of course they come with a price," said Richard Hwang, Director of Finance at Pay1Day.com. "Our short term loans helped many borrowers get money on demand and avoid unnecessary overdraft fees and other type of late fees."

Why Payday Loans Are So Expensive

It is true that payday advance loans can be expensive in terms of fees and interest rates but that is because they are considered high risk loans with higher default rates. Many payday advance lenders  are reporting millions of dollars will be lost this year because 20 - 40% of borrowers will default on their payments.  

Responsible Payday Lenders

Many direct payday lenders have been adopting responsible lending practices while informing and educating their customers about payday loan risks.  For example, Pay1Day.com advises customers that payday loans are to be taken for emergencies only and customers with more than two open loans should not and would not be able to qualify for any future loans until the number of loans drop. Many other direct payday lenders have similar rules and policies in place to protect both the customer's and lender's best interests. Yet despite all these self regulations, payday lenders could be overregulated by a new financial reform bill governed by the CFPA.  This could have a negative impact; stifling payday lending puts a roadblock on consumer financing as well as the economy.

SOURCE Pay1Day.com