Proposed Payday Loan Policies

Money is a big concern for people. People need money to answer concerns like bills, food and clothing. For this reason, some businesspeople came up with the concept of payday loans as a response to immediate and legitimate needs for financing.

While payday loans services grew from a small business to a large conglomerate by providing fast and easy loans, the companies offering this loan are not free from criticisms. Some financial experts and consumer groups have raised concerns about payday loans because of its how it operates. The following are some suggestions that states and payday loan companies are trying to agree upon.

Better regulation

Some states like to see a governing body that rules over payday loan companies. The regulating body’s aim is to plan loan structuring and regulating companies offering the loan. Some states also plan to put a cap or maximum allowable interest rate on a payday loan so it coincides with existing state laws.

Limited roll over periods

A loan ‘rollover’ means paying a fee to delay paying the loan’s amount in full. Since a payday loan company allows its customers to rollover a loan several times before paying it, some states feel the rollover periods should be limited so clients will not pay much more than they borrowed. Once a limit is in place, a borrower and lender would then negotiate how the former can pay back the entire loan without paying more fees.

Imposed payment schemes

Because a payday loan company doesn’t have any state-imposed payment scheme in place, state authorities want to see one soon. The payment scheme would let potential delinquent borrowers to pay the loan amount in installments after the end of a limited roll over period. For instance, if the borrower owes $345, the lender should then arrange for a payback using a monthly or weekly installment.

Restrictive borrowing

Some studies show that a payday loan company can let its clients get loans from other lenders to pay off existing loans. States want this to stop because it promotes borrowing more money to pay off borrowed money. Instead, some states want to limit a prospective borrower’s ability to owe maybe one or two lenders instead of owing five or more companies.