Payday loans are short-term, high-interest credit products that consumers can take out to make up for job loss, decreases in income, or other expenses.
State laws that prohibit payday lending, cap interest rates on small loan rates, and require lenders to pay borrowers back on time may help to reduce the number of consumers who get trapped in debt traps, researchers report.
Payday loans are a type of short-term loan that can be used to cover bills or emergencies. They can be repaid on your next payday and are generally available outside traditional banking hours.
They are a budget buster for many Americans and can lead to serious financial issues, including high interest rates, debt traps and damage to your credit score. In addition, payday lenders target poor communities and people of color, a fact that has drawn scrutiny from lawmakers.
In some states, limits on payday loans exist, such as maximum loan amounts and minimum loan terms. Several states also have caps on interest rates and fees.
In a recent study, Pew Charitable Trusts examined state-level policies that govern payday loans. It divided the states into four groups based on their payday lending laws: few safeguards, some safeguards, reformed, and restrictive.
Prepaid Debit Cards
Prepaid debit cards are a convenient alternative to credit cards for people who don’t have a bank account or are on a budget. They can be loaded with money using a mobile app or participating ATM, and then spent anywhere that accepts debit card payments.
Despite their popularity, they aren’t always the best financial solution. The main drawback is that they aren’t as secure as traditional debit cards.
Fraud experts say that prepaid cards are often used by money launderers because they aren’t tied to specific identity and can be easily stolen. Criminals can then use the cards to buy goods and services anonymously.
The Consumer Financial Protection Bureau has issued a compliance bulletin today, halting companies that distribute government benefits through exclusive contracts with prepaid debit card providers. The agencies says these companies may be abusing these exclusive contracts to illegally extract fees from consumers.
Many online lenders offer loans that are simple to obtain – often by completing an application with a few clicks of the mouse. In some cases, the lender can even tell you instantly whether or not you’re approved.
However, they are also often less regulated than traditional banks and credit unions. They may not be able to offer the same range of loan products as traditional institutions and their fees are often higher than what you can find with a bank.
Despite these disadvantages, the industry is growing rapidly. New federal rules are expected to be announced by the Consumer Financial Protection Bureau this year.
To avoid the high costs associated with payday loans, check your state’s laws to make sure that you don’t qualify for a loan. And remember, if your lender violates state law, you should close your account and seek redress.
Lead generation companies collect information from consumers and businesses to help them get the best leads for their business. They do this through various marketing channels such as social media, emailing, and online advertising.
Some states have tough laws to prevent payday lenders from preying on people in need of cash, but these predatory loans often evade enforcement by hiding behind layers of anonymously registered websites and “lead generators,” which connect consumers with online lenders.
The New York State Department of Financial Services (DFS) recently banned a company called Blue Global LLC from promoting and selling illegal, online payday loans to New York consumers. It also ordered the company to adopt data security measures to protect consumer personal information and pay a $1 million penalty.
This is one of many lead generation bans being imposed on the payday loan industry by states and governments around the country. These lead generators collect personal and financial information from consumers and sell it to lenders.