Recently, the CFPB proposed “rules that would end payday debt traps by requiring lenders to take steps to make sure consumers can repay their loans.”
“What the rules actually would end is the availability of much-needed credit for millions of Americans,” says Andrew F. Quinlan, the cofounder and president of the Center for Freedom and Prosperity, in a recent editorial.
The rules, Quinlan believes, could cause more harm than good.
“Borrowers who rely on payday loans don’t generally have access to alternatives. Where others might cover an unexpected expense by using a credit card, for instance, they are forced to take out small, short loans to get to their next paycheck. This is because their financial history or income makes them too risky for traditional banks.
“The CFPB wants to protect such borrowers from digging themselves into an even deeper financial hole, but in so doing it will further restrict credit to the very people who may need it most to pay bills, visit the doctor, or repair a car needed to get to work. Even CFPB’s own analysis acknowledges that between 60 percent and 80 percent of the small-dollar loan market could be eliminated, which would force many to turn to even less desirable options.”
“It’s not fun living paycheck to paycheck,” Quinlan writes. “Millions of Americans struggle with that reality daily. The last thing they need is a nanny government pretending that it is to their benefit to have their already limited options restricted even further.”
Read more at Philly.com.