Consumer groups, faith leaders, and those who say they’ve been victims of payday lending practices in Michigan are hailing the release of proposed rules by the Consumer Financial Protection Bureau to regulate the small-dollar loan industry. Perry Green, a former payday-loan customer, says he didn’t have enough cash to pay his rent and needed a short-term solution. But with his student loan and other debts, Green says one payday loan turned into many.
“It was frustrating to keep going back, because I would need to continue to borrow for those expenses, and it turned into an endless cycle of borrowing,” Green said. “I spent almost $1,000 on fees and interest alone, although I originally just needed to borrow $300.”
Under the new rules, lenders would need to verify their customer’s income to confirm their ability to repay a loan. Also, the number of times a loan could be rolled over into a new loan would be curbed. The payday-lending industry maintains the proposed rules would be a blow to consumers, by limiting credit for those who use payday loans to cover unexpected expenses or a budget shortfall. An estimated 12 million Americans a year borrow from payday lenders. The Consumer Financial Protection Bureau is taking public comments on the proposed rules through this fall.
