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Regulatory reform to limit payday loan’s APR

Payday loan regulatory reform has brought payday loan careful public attention. The creation of an agency to regulate financial service providers terrifies cash till payday industry. To understand what is going on let's have a look!

What does the regulatory reform aim at?

So far there exists a regulatory reform covering banks. The reform's priority is to protect individuals from violation of their undeniable rights.Regulatory reform to limit payday loan’s APR

Nowadays, however, there are a lot of financial services and the abovementioned reform is insufficient to protect people from cheating. To be more precise, the regulatory agency will be authorized to regulate payday loan lending, debt collecting, and other practices. The agency will have the legal power to create new rules and enforce them when necessary.

Payday loan industry was complained about providing exordial rates, late payment fees, and, moreover, imposing expensive services to the population with low income. With the consumer groups lobbying for restriction of the industry, the authorities initiate creation of the agency.

How does the industry react to the reform?

According to the industry representatives, putting of a cap on the maximum amount of APR is likely to destroy a lot of payday loan lending businesses.

The cap of 36%, previously topical for loans made to members of the armed forces, is now proposed as common limitation.

One of the biggest online payday loans companies in the country, Advance America, filed a statement with the SEC. The company says the enforcement of the reform will do extreme damage to the company's business and is likely to stop all current operations.

Advanced America stated the current policy in respect of payday loan industry has made a significant obstacle on the way of industry's growth.

The industry's spokesmen assert that the reason for financial instability in the country lies upon banks, and the current state of things shows that the banks are trying to make payday loan industry look guilty.

Overall, payday loans in one hour lenders think the reform should regulate banks only.

Posted on Mon, 2010-09-06 13:59
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