Payday Loan Regulation May Leave Some in the Lurch

From AllGov:


Stacy Cowley, © 2016 New York Times News Service

CANTON, Ohio — This city of 73,000 is known for a few things — the Pro Football Hall of Fame, the presidential library of William McKinley, a lively downtown arts scene.

But in banking circles, it has gained a more distinct reputation: Canton is a nexus of the payday lending industry, in which people who have trouble making ends meet from one paycheck to the next take out high-interest loans from specialty lenders.

On 30th Street, a half-dozen payday lending outlets surround a popular shopping center, and at lunchtime they draw a steady crowd of customers. At the Advance America shop, Martin Munn stopped in recently with his young daughter to do his biweekly banking: Nearly every payday, he cashes his check, pays off his last loan in full and takes out a new one against his next paycheck. The amount he borrows varies, but it is typically around $500, for which he pays a fee of $73 — a 380% annual interest rate.

The woman who manages the store, Tanya Alazaus, greeted Munn with a smile. The shop looks like a small bank branch, with clerks waiting behind counters to handle transactions and chat with their regulars. Alazaus sees herself as a local family merchant.

But federal regulators view her and businesses like Advance America quite differently: as part of a predatory industry that is ripe for reform and a crackdown.

The Consumer Financial Protection Bureau, the watchdog agency set up after the last financial crisis, is poised to adopt strict new national rules that will curtail payday lending. These will limit the number of loans that can be taken in quick succession and will force companies like Advance America to check that their borrowers have the …

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