The New York Times is reporting the Consumer Financial Protection Bureau (CFPB) may take action this year to rein in the abuses in the payday loan industry.
Research by the CFPB has shown more than 80 percent of payday loans are rolled over or followed by another loan within 14 days; half of all payday loans are in a sequence at least 10 loans long.
“Our research has found that what is supposed to be a short-term emergency loan can turn into a long-term and expensive debt trap,” said David Silberman, the bureau’s associate director for research, markets and regulation.
The CFPB is looking at establishing federal rules that will apply to all payday loan companies and borrowers across the United States. These new rules are estimated to tighten rules who can get a payday loan and limits on the size and frequency of the loans. It may also provide a universal interest rate cap on the loans.
The new rules covering payday loans are expected in the next few months.
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