There are some large payday lender companies lobbying Capitol Hill and doubling their contributions pursuing an interest towards changing state payday loan online regulation laws. Not only is the online payday lender looking to have the regulations dropped, but they are pushing to have the “payday” terminology dropped from their firms.
What is the problem with state regulation of payday lenders online?
Online payday loan lenders must follow state regulations set in place to protect the residents of each particular state. Some of these states have strict rules, others have permissive rules and then there are some who fall in the middle as hybrids. The lenders have their potential interest charges capped, loan amounts capped and with some states, how many loans are allowed at one time or throughout a 12 month period are regulated as well. These regulations have kept predatory lenders from doing business or at least forcing them to change their practices.
Here is the catch, the biggest complaint behind the push to abolish state regulating payday loan. The states are not regulating all online payday loan companies. Native American based lenders and those located overseas are not governed by these regulations which leave an unfair competitive playing field for those that are. When you have lenders who follow rules; keep prices and loan amounts capped, only approve so many loans per twelve month period, and refuse to loan to those residing in states which ban payday loans the regulated lender has a closed playing field.
Unregulated lenders will loan to residents who are otherwise not allowed to borrow from payday lenders. Those people who are looking for larger amounts or additional loans which otherwise could not be provided, are finding the fast cash with these companies. State regulators have been unsuccessful in gaining any leverage over these companies, in fact, collection practices also fall under the governed radar putting residents are at risk.
The counter argument is just as strong. There is a fear that the dilution of these regulations would only bring poor practices back to these companies and residents would be fully exposed to predatory lenders. The counter argument continues to push for local accountability and oversight of the payday loan online industry.
Steering clear of “payday” loan lender
Some firms are avoiding the use of the term payday associated with their company. The critical reputation behind payday lenders is pushing companies to find alternative words to describe their services. References to “direct deposit advances” and “checking account advances” are now being introduced with the hope that the negative cloud which follows “payday” will no longer be assimilated with their companies. Banks are already using these terms to offer customers short-term high interest fast loans as checking account advances and direct deposit advances. Does this loan description sound familiar? It should, it has payday loan written all over it.
Disguising a loan by changing a name will attract customers who do not familiarize themselves with the terms and policies, but go on reputation alone. Banks have a great reputation backed by the Federal Reserve, how could a loan from a bank or credit union hurt my finances? It could in the same way a payday loan one could, but in this case, your checking account could also be seized since the lender is the bank itself.
