New Regulations Could be on the Way in the Payday Loan Industry
WOAI-AM/KQXT-FM/San Antonio, Texas
3 JUne 2016
Federal investigators are again looking into alleged abuses in the Payday Loan industry, where vulnerable low income people are give high interest short term loans, News Radio 1200 WOAI reports.
One of the proposals being considered would be a rule that would require lenders to make sure the borrower has the ability to repay the loan before giving them the cash.
Federico Pena, with the San Antonio office of Greenpath Financial Wellness,' says San Antonio has one of the country's highest rates of payday lending, and he says the interest rates charged are mind boggling.
"395%, sometimes even 400%, I've seen on some payday loans," he said.
The Payday lending industry says the loans are supposed to be short term 'bridge loans' which are used to help a low income person deal with an emergency between paychecks. They say these individuals are by nature a poor lending risk, which is why they choose payday lending. They say without payday lending, there would be no place for low income customers with bad credit to turn to in emergencies.
But Pena says these type of interest rates are guaranteed to drive the borrowers further into the hole. He says a real problem is when people are forced to pay off a payday loan with another high interest payday loan.
"Any time that you charge triple digit interest for a loan, it doesn't solve financial problems, it actually creates more of them."
The regulations, which don't need Congressional approval, could kick in next year.