Rules in works to stop payday loan debt
WASHINGTON - Efforts to stop debt from payday loans are still underway for lawmakers. Federal regulators say they are now putting together the first-ever rules on those loans to help cash-strapped borrowers avoid falling into a cycle of high-rate debt.
The Consumer Financial Protection Bureau says state laws governing the $46 billion payday lending industry often fall short and fuller disclosures of the interest and fees may be needed.
The annual percentage rate of such loans typically exceeds 300 percent.
The efforts come after multiple atempts by local lawmakers to fix the problem. In April, the Louisiana Office of Financial Institutions reported that residents in the state shelled out $146 million in fees and interest on the loans in 2013, but the report did not sway a vote favorably to get a Baton Rouge lawmaker's bill passed that would have put a cap on payday loans' annual interest rate at 36 percent. Opponents of the bill said the bill died on the Senate floor because it would have shut down the storefront lending industry in Louisiana.
Full details of the proposed rules from the feds are expected early this year.
A payday loan, or a cash advance, is generally $500 or less. Borrowers provide a personal check dated on their next payday or give the lender permission to debit their bank accounts.
Charges often range from $15 to $30 per $100 borrowed.