Saturday, July 23, 2016

US Consumer Financial Bureau Restrictions On Payday Lending Will Increase Borrowers' Bankruptcies And Borrowing Costs

From The New York Times, DealB%k, "Payday Loan Limits May Cut Abuse but Leave Some Borrowers Looking" by Stacy Cowley:
"We’re very concerned that if this [Consumer Financial Protection Bureau (CFPB) rule ending payday debt] goes through ...," said Pat Crowley, a spokesman for the Ohio Consumer Lenders Association. "There will be less credit available, and those who find a resource will pay more."

Many economists fear that he is correct — and that low-income consumers will be the ones who are hurt.

In 2004, Georgia made most short-term, high-interest loans illegal. In the wake of that law, Georgia residents paid more bounced-check overdraft fees and became more likely to file for bankruptcy, according to a report by the Federal Reserve Bank of New York.

A sweeping study of bans on payday lending, scheduled to be published soon in The Journal of Law and Economics, found similar patterns in other states.