Payday lending: the more things change, they more they stay the same.
Sept. 5, 2016
As the CFPB (Consumer Financial Protection Bureau) and state legislatures close doors to the worst of the abusive lending practices of the Payday industry, short term-high-interest lenders look for new ways to service their customers (or, in other words, bolster their profits). All of America's biggest payday lending companies appear to be increasingly shifting their business models from shorter-term payday loans to what are termed "installment loans." What is the difference? Well, a "Payday Loan" requires repayment of a loan within days or weeks, while an "Installment Loan" is repayable over several months.
At first glance, that appears to be a win for consumers, because it allows for more time to repay the lender and doesn't build up the huge "loan origination" fees. However, when it still carries the same sky-high interest rates, that same borrower may have just jumped from the frying pan into the fire.
Simply, as a Pew Study noted: while installment loans appear to provide more flexibility for borrowers, they share the same risk as payday loans in ensuring that borrowers become trapped in a cycle of unaffordable debt repayment.See more at MSN.com