Payday lenders have come under increasing scrutiny lately as the Consumer Financial Protection Bureau (CFPB) takes regulatory aim at short term, high interest loans. There have been state-level attempts to curb predatory loans in the past, however these lenders have proven to be quite adept at maneuvering around the law. With interest rates as high as 500%, payday loans can quickly overwhelm many borrowers, trapping them in a cycle of debt that is difficult to escape.
CNBC reports that according to research [PDF] from the Insight Center for Community Economic Development, “The burden of repaying the loans resulted in $774 million in lost consumer spending and 14,000 job losses. Bankruptcies related to payday loans numbered 56,230, taking an additional $169 million out of the economy.” It is still unclear how the CFPB is going to approach this issue, as there is a tight rope to walk between eliminating destructive practices without halting similar loans that act as necessary lines of credit for people in need.
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