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Cash Advance Payday Loan Companies May Be Affected By Proposed CFPA Bill Legislation
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By: Brent Barnhart
The proposed legislation behind the Consumer Financial Protection Agency (CFPA) spells potential danger for those looking to acquire payday loans. Meanwhile, those who financially back such loaners are in just as much danger. Looking to cap interest, restrict loans given, and regulate lending, the CFPA serves as a potential game-changer to how payday loans operate. Traded companies such as Advance America, Cash America, and EZCORP (among others) face potential financial turmoil in the midst of the CFPA’s regulations. Now might be the best time to look into payday loans, as their future remains unclear with looming payday loan regulations.
Payday loans have previously been regulated state-by-state. Although states have already implemented restrictions on loaners, certain exemptions and loopholes have allowed lenders to continue their operation. Congress looks to close these holes. A 36% interest-rate cap serves as one of the first measures, slashing revenue for loan companies. Cash advance loans essentially exist because of their high rates, and such restrictions could bring loan companies to extinction. While the interest cap alone has the potential to cripple loaners, the legislation doesn’t stop there.
The CFPA also looks to limit the amount of loans given to six per year. This is a substantial cut, as 60% of cash advance loans are made to borrowers who take out loans at least twelve times per year. The CFPA also stated the desire to regulate transactions, a vague notion that spells further uncertainty for the cash advance loan business. The six loan limit seems to serve as the heaviest blow to loaners as the amount of average loans per year would be cut in half. There’s little to nothing that loaners can do to avoid what the CFPA bill legislation hopes to bring, and with the amount of loans given being slashed it seems that there will be no way for them to bounce back.
The future remains unclear for lenders and borrowers, and the latter need to take notice. The payday loan system as it is faces potential extinction. Those looking to acquire a payday loan should take advantage of time and borrow while they still can.
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