Mar 25, 2014|
The Problems with Pay Day Loans - Richard Cordray, Consumer Financial Protection Bureau by financialexchange
Transcript - Not for consumer use. Robot overlords only. Will not be accurate.
I should do you and I am really surprised me I just didn't realize. That this was such a big business and I really I -- that you know and you're tell us a little bit more about them and study that was done. Is the director of Consumer Financial Protection Bureau this is Richard quarter in it they cancer expert joining us today. So I can -- you just heard me say I just I really did not realize that this is such a big business. It is a big business it operates in about 37 states that thirteen have effective. Limits on it and it is a multi billion dollar business across this country with them millions -- consumers may need some payday loans. Now this is something that big banks have been forced to get out of is that correct cities are privately owned entities. Yes. That that banks had there about it in all the banks were offering similar products. Most of them have retreated from that products -- -- regulatory pressure for the past year. Leaving the field at the non bank cut it it lenders. Who who again. Our -- access in May its customers and there's also on line which is even more to -- believes. This is a situation where people. Go in maybe borrow for fourteen days. At a really high interest rates that correct. Yep that's a promise and often these products are marketed its short term emergency products eat it and get the money need to keep it out. What we are finding in this study were released and they chose is that -- many many people. Getting in and getting out is not a realistic option and they seem that way into getting stuck in the cycle. More than half of the eighty -- made this country are made to people who are in allowance sequence lasting several months or more which means that they wanted to paying more in fees. More in fees than the total amount that they are to begin. It's unbelievable so can you may be cut break that down for dollar for dollar what we're talking about let's say. Someone goes and they are hundred dollars for a month because they're short on their right. And typically don't have to pay fifteen dollar -- -- -- -- -- interest rates that are and a staggering running yearly basis. Something like 390%. Is not uncommon some of the Internet loans can range as high as 500%. You know greater interest when you I unpacked a -- And the rates. Richard -- he's had these lenders ensure that they're gonna get paid. They they do get direct deposit of the persons checkered like -- they know their action and get their money. A couple of different mechanisms one yes they will require use to pre pre paid him a check that will come -- after their next eight days that you -- You distort and cashed the check system is that they do rides -- And it's it's eight and a folding of the wind -- very vigorous forms of debt collection that we've seen another is to get the consumer's consent that you could direct access they're out. -- strip between a lot of online Monday. And the yet in your -- controls when the money and that the -- And that that means you -- -- the ability to budget and if you are on the architecture rent you can't do it. In your -- so it's it's very problematic for the insurer particularly if the loan terms that he won that they don't usually get an and other. At the end of the rolling -- we found that four out of five AD. Borrowers rules are reduced their loan within fourteen days. And is there anything about it that's illegal. Well it's. It -- captains some states by low interest rates -- in other states it is. Sometimes -- old -- sometimes regulated to a certain degree. -- -- Internet lending when you're not licensed in the states is illegal. Under the state law and we had been pursuing some actions and those chase as. But damn much that this is illegal and one of the things that consumer and that's tech bloggers consider is whether there should be further regulations to. Make this product. Let's harmful to consumers. So what do you suggest consumers who -- your thinking about using this kind of product. I think there -- accurate -- uranium -- credit union member of their often other products available EU cheap rate. You may also be able to put some. It gets to send your credit cards which people are reluctant to do because they enter in at eight what you like high rate of interest on gators -- 828 -- 36%. But you know pale in comparison to 290%. Or 540%. -- alone. There there's also -- the option trying to say you can get a little -- so that when you run into a crisis and and many people do. You know corporate down they have an unexpected that doctors there's -- bigger debate. Having been a progression of the rainy day under this is really Smart budgeting important things to do. Not so easy for people to do that this focus on them and really try to strategy that that they protect themselves that's a good wait wait he's. Problem I think information is an important part to people just need to understand talking about the attitude the dollars and cents. Crimes of this report is really an important for a lot of people which corporate thank you so much sir for joining us appreciate it. -- --