Payday loan industry celebrates rollback in regulations, consumer advocates not happy
The payday loan industry is celebrating a victory this week.
Some planned regulations that were set to roll out next year have been cut back.
The overall plan was drafted during the Obama administration.
The part that was cut includes requiring lenders to check borrower's incomes to make sure they have the money to pay back their loans, and not allowing lenders to continue automatic withdrawals after two consecutive failed attempts.
Critics say the Consumer Financial Protection Bureau is siding with the industry that it's supposed to keep watch over.
We asked people in Chattanooga what they think about the payday loan industry.
"Horrible, ripping off the poor people that's what I think it is," said Ryan Jamison. "Sometimes people that aren't as educated don't understand what's happening, they just know it's instant cash."
"I think they're a ripoff," Martha Foster said.
"Any type of loan is a rip off," Tom McGovern said.
McGovern says he has used payday loans before.
"The interest rates were quite high," McGovern said. "It was a rip off but it was something to help me at the time."
Check Into Cash is headquarted in Cleveland. Senior Vice President Jabo Covert says they don't target people with low incomes, and they only lend to people who have a job and a bank account.
He sent us this statement:
“While we haven’t had a chance to fully review the entire document, we do see that some needed adjustments were made to the original rule. As drafted, the original version of the rule would have cut off a vital source of regulated credit to millions of Americans. While many of the onerous requirements of the original rule remain in place, this was a reasonable step to help maintain access to credit. We continue to work with our state and federal regulators to develop fair and appropriate regulation.”
He also referred us to this website for more on their take of the regulations.
Data from the CFPB says 80 percent of these loans are taken out within two weeks of repaying a previous one.
"I think it's so easy that it's misused, and people don't understand the interest that they're paying so no I'm totally against it, but it's kind of like a necessary evil I suppose," Jamison said.
"They get so far behind they can't ever catch up," Foster said.
Metro Ideas Project is a public policy research group in Chattanooga.
They released a study last year called Fighting Predatory Lending in Tennessee.
They say Tennessee has the most predatory lenders in the country, and that Hamilton county has more than 70 alone.
The study also says people making less than $40,000 annually are the most likely group to use payday loans.
"They make it so accessible and so easy," Jamison said.
"I do think more regulations are needed because all they're doing is taking advantage of people that don't have anything to begin with," Foster said.
Chattanooga City Council member Carol Berz has been a part of educational panels about the industry.
"I think we have to be very careful with payday loans," Berz said. "They are predatory lending, they're usurious."