Are The New Laws On Payday Loans For Public Interest?

We have all come across the news that the Consumer Financial Protection Bureau (CFPB ) is all set to put on restrictions on the payday loans. It is believed that it will bring about a political battle as because people believe that their interests have been obstructed. Those who are standing against the regulations say that this is an inconsistent move on the government hurting the interests of the middle-class Americans. The supporters claim that this extreme move is the outcome of the prevailing practices. They say that this approach is directed towards the consumers who had been facing financial issues.

Do you know what a payday loan?

It is a small loan which can be acquired from a  bank or a financial institution which offers loans on shorter terms. These loans are not available to everyone. Suppose you are a businessman having to deal with several of your clients every day.You cannot avail the facilities of the loan. The loan can be applied by someone who works in an office and is a loyal employee. If he or she undergoes a situation of financial crisis and needs a small amount of help can apply for the loans. The loan may be available within $150 to $400 repayable in a few weeks.

Why do people prefer these loans?

Majority of the people belongs to the middle-class society. They live from paycheck-to-paycheck and are left without any savings at the end of the month. For them, these loans are a very convenient option to overcome the sudden financial crisis. These loans are available without a credit assessment and the cost ranges from $15 to $20 for each $100 taken.

To assure the lenders that the borrowers can pay the loan, they provide the lenders a direct access to their bank accounts. As soon as money is credited to the account, the lender can deduct the repayment installment. In certain cases, the borrower’s personal asset is taken into account in the case he fails to repay the loan amount.

Why are the restrictions being introduced?

As per the regulation announcement earlier in October this year, small cash advances regulations are subject to undergo changes from 2019. The reason for introducing these changes is because of the two types of borrowers in the market. The first group is the “cautious” group, who do not require these loans frequently. They are regular to pay their dues. Another group is called the “heedless”. This group is in continuous indebtedness. They frequently need loans and do not bother about paying back.

What will be the effect of the new rules?

The new rules by the CFPB are all set to shut down the access of the heedless froup to these loans. From now on the lenders will have to determine the capability of the borrower to repay the loan while being still able to meet their standard of living. In order to do that the income of the borrower will be verified and if they are having any major financial obligations. This rule is a  major threat to the financial market and claims to wipe out the companies from their business.  Due to the documentation requirements, the origination charges for the loan are said to increase. It will become a burden on the underbanked borrowers. The companies will be losing their profitable part as the number of heedless borrowers is the most in number.

Going back to the question mentioned above, we find from the consumer’s point of view that the new regulations on the payday loans are not at all a boon. The majority of the people who used to manage their finances with the help of these loans will now come under a lot of financial pressure.

CFPB’s Hand in Controlling Payday Cash Advance

The Consumer Financial Protection Bureau on October 5, 2017, announced that it is going to add new rules to the payday cash advance loans.  This step is right to cut a hole in the pockets of the middle-class Americans. Do you know why all this are happening? Did you hear that Richard Cordray, the Consumer Financial Protection Bureau’s first director is going to resign from his post? Well, there are rumors going the round and we are not sure whom to believe until recently we heard that Richard Cordray has flipped down his plans to enter the 2018 Ohio governor’s election the day when our beloved Mr. Donald Trump has won the presidential elections.

Earlier Richard Cordray did hope to run the race if Hillary Clinton had won the elections in 2016. As the Democrats no more retain control over the agency he changed his plans. He knew all about the Republicans and that they would uncover all the truths about the Bureau. Let us remind you that the Bureau had failed to investigate the Well Fargo case and other scandals. In the Well Fargo case, the Bureau was the advisory body. It was not found out what was going on until the California regulators and Los Angeles Times have reported them. If Cordray resigns, there will be no power that will protect such detrimental facts about him.

He, on the other hand, did not think of backing out from his Ohio plans at first. He thought that if the president will remove him from the post he will go along with the plan. Nothing like that happened and on Nov. 18, 2016, the Bureau petitioned the court to rehear the case where earlier the Bureau’s structure was found to be unconstitutional with the statement that the director had no plans to step down until July 2018.

Trump, if wanted, could have dismissed him from the post. But he didn’t, and the experts feel that his reason was mainly academic. If he would have done that the legal remedy for the unwarranted removal would almost be back pay. The administration waited that if the court denies the petition then that will put an end to any further controversy.  But the reverse happened. The court granted the petition. Later it was heard that the president’s chief economic adviser, Gary Cohn dined with Cordray and discussed his plans to enter the campaign. It is said, that the director of the Bureau was given the offer of not being fired if he agreed to resign after a certain date. The director neither gave his assurance nor denial and made Cohn understand that the rumors were true.

Before any further action was taken by the Republican government Cordray made the CFPB attorneys complete a rule banning the contracts of the consumers so as to resolve clashes. Now, it has come out with new rules for small dollar loans. The common people who have a tough time managing their expenses will be at problem. People who depend on their small income often have to turn to small loans for help. No assessment check was performed to get the loans. Thus, the process to obtain was easy and fast. Now, with the new rules, the lenders will have to verify all their background details. This will raise the origination costs.

Having said that, it is quite clear that the people on the marginal line will not be able to approach for the loans. This will put a pressure on their financial management and also make several private financial companies cease to exist. Putting new rules on the payday cash advance is altogether not a solution. If at all the Bureau wants to control the economy, they should first look into stopping all the scandals and frauds that are taking place right under their nose.

CFPB Arrests Online Lenders, Payday Loan Providers on High Alert

The ongoing struggle between payday money lenders who provide services like payday loan and the Consumer Financial Protection Bureau has been widely publicized. People have not taken the proposed abolishment of helpful services like fast cash or car title loans.

The Consumer Financial Protection Bureau (CFPB) recently acted against four online payday lenders. They were-

  • Silver Cloud Financial, Inc.
  • Mountain Summit Financial, Inc.
  • Golden Valley Lending, Inc. and
  • Majestic Lake Financial, Inc.

These four online payday money lenders were charged for misleading customers by gathering debt they were not lawfully due. In a suit registered in federal court, the Consumer Financial Protection Bureau alleged that the four online payday money lenders could not lawfully collect on these arrears because the advances were annulled under state laws overriding caps of the rates of interest or the licensing of money lenders. The Consumer Financial Protection Bureau alleged that the money lenders made misleading demands and unlawfully took cash from customer bank accounts for ‘sum unpaid’ that customers did not lawfully owe. The Consumer Financial Protection Bureau pursues to stop the illegal practices, recover compensation for hurt customers, and levy a penalty.

Golden Valley Lending, Inc., Silver Cloud Financial, Inc., Mountain Summit Financial, Inc., and Majestic Lake Financial, Inc. are online payday money lenders and loans and advance providing companies located in Upper Lake, California. Since the year of 2012, Golden Valley Lending and Silver Cloud Financial have made accessible online advances of $300 to $1,200 with yearly rates of interest that ranged from 440% up to 950%. Mountain Summit Financial and Majestic Lake Financial started offering comparable advances more recently.

The Consumer Financial Protection Bureau’s examination exposed that the high-cost advances dishonored licensing necessities or caps of rates of interest – or in some cases both. This made the advances annulled in its entirety or in part in around seventeen states:

  • Arizona
  • Arkansas
  • Colorado
  • Connecticut
  • Illinois
  • Indiana
  • Kentucky
  • Massachusetts
  • Minnesota
  • Montana
  • New Hampshire
  • New Jersey
  • New Mexico
  • New York
  • North Carolina
  • Ohio
  • South Dakota

The Consumer Financial Protection Bureau alleged that the four online payday money lenders were collecting cash that customers did not lawfully owe. The Consumer Financial Protection Bureau’s suit alleged that Golden Valley Lending, Silver Cloud Financial, Mountain Summit Financial, and Majestic Lake Financial dishonored these acts:

The Precise Accusations Include:

Deceiving customers about loan expenses that were not legally payable: The money lenders chased customers for payments even supposing the advances in question were annulled completely partly under state regulation and the collection of these payments were not authorized.

Collection of credit payments which customers were not obligated to pay: The four, online pay day money lending corporations made electronic extractions from customers’ bank accounts or phoned or delivered letters to customers asking for payment for arrears that customers were not legally responsible to pay.

Failure to reveal the actual cost of credit: The money lenders’ web pages did not reveal the yearly rates of the percentage that were applied to the advances. When communicated by potential borrowers, the representatives of the money lenders did not inform customers the yearly rates of the percentage that would be applied to the loans.

Not every payday money lender, however, practices illegally like those four. The Consumer Financial Protection Bureau has in the past, notoriously tried to pigeon hole all payday money lenders into the same bracket, doing their best to eradicate helpful financial products like the payday loan. The public however still are not convinced that these alternative banking institutes are the real cause of their problems.

CFPB Attacked by Judicial Branch for Putting Pressure on Payday Advance Loan Providers

Recently, the US Court of Appeals for the District of Columbia launched an attack on the CFPB (Consumer Financial Protection Bureau), a federal agency with a lot of baggage. This agency has tightened its grips on payday advance loan providers with the argument that they lure low-income Americans to a trap. The CFPB has been described by the appellate court as “a gross departure from settled historical practice” and “unconstitutionally structured”.

Brett Kavanaugh, a Circuit Judge of the US, argued that the structure of the agency poses a really great risk of arbitrary decision-making, as well as, abuse of power. Moreover, it is considered that the agency is a greater danger to individual liberty as compared to other multi-member independent agency.

The judicial retaliation was long-overdue. After the financial crisis in 2008, it is believed that the CFPB went absolutely off the hook and began to wield primarily unilateral power to overwhelm both employers and employees with massive financial regulations.

The agency functions almost completely outside of the domain of congressional oversight. It gets its funds as a percentage of the budget of the Federal Reserve. Neither does the CFPB rely on approvals for funding through the general or normal process of appropriations nor is the agency under any kind of obligation to modify its practices on the basis of congressional enquiries.

Director Richard Cordray, the head of the agency, is an appointee of the White House and can only be removed from the position by the President for justifiable causes. This was the case until the appellate court recently voided the provision of for-cause when it highlighted on the lack of transparency of the CFPB.

The rights to issue and implement financial regulations without any congressional approvals are still reserved by CFPB leadership. Financial services that are under the jurisdiction of the CFPB are credit cards, mortgages, check guaranteeing, loan servicing and payday loans.

The regulatory restrictions are especially more on payday lenders, who offer short-term loans to millions of low-income Americans in an urgent need of quick cash. The agency believes that regulatory oversight can protect the interests of the payday borrowers from the exceptional high rate of interest and “payday debt traps”, which leads to small-dollar borrowers never being able to repay their loans.

In order to undermine the relationship between the lender and the borrower, the agency has used “debt trap” for its argument. At present, the CFPB needs the payday lenders to verify the income of the borrower, their major financial commitments and history of borrowing before giving them the loan. In order to lengthen the procedure of payday lending, the agency has also announced a really long list of “affordability criteria”. This has led to the creation of a wall between lenders and individuals who are in desperate need of money.

Excessive red tape has also victimized community banks. Since the passing of the Dodd-Frank financial reforms in the year 2010 that led to the creation o the CFPB, only 3 new community banks have opened. Before, there was an average of hundred every year. The number of community banks is twenty per cent less than what is was before the issuance of the legislation. Even though the 22,000 page long regulation is aimed at the large investment banks to prevent another financial crisis, they are hurting the smaller banks in the process.

The CFPB’s overzealousness in handling the issue of payday advance loan providers and small community banks continues the traditional of overregulation of the federal government in the US economy. If the ruling of the District Court proved anything, it is that the government should play a really minor role.

A Possibly Gloomy Future for Fast Cash Loans and Consumer Financial Protection Bureau Under Trump

Donald Trump from the initial days of his campaign has been very vocal regarding his dislike for the regulations under the Consumer Financial Protection Bureau which was set up on 2010 in relation to the protection of consumer rights. It was not an unknown fact that everyone was very much sure about the possible dim future of the CFPB after Trump’s win in the Presidential election. The transition plans are in the process and it can definitely be inferred that the regulations under the CFPB are not going to remain the same and will definitely undergo a lot of changes, affecting the fast cash loans the most.

Will CFPB Undergo Annihilation?

The regulations encircling the CFPB were not something that was favored in the initial days of its proposition and was opposed by a number of lawmakers. It is Congress who is scrambling for ways to get to dismantle the entire agency but the Democratic filibuster is acting as a restriction in the process.

A member of the U.S Public Interest Research Group, Ed Mierzwinski reported that several of the anti-CFPB lawyers are seeking ways to sneak through this filibuster and be able to enforce laws to break down the entire agency. The lawmakers are suggesting independent bills to put a halt to the independent funding and simply opt for the commission type of funding.

The Strongest Opponents

While many people were definitely not in favor of CFPB and the regulations it inflicts but the most important person that has been anti-CFPB is the Chairman of the House Financial Services Committee, Rep. Jeb Hensarling. He is the one who is most likely to take the place of the Treasury Secretary.

He was the only one amidst the House Members who received contributions for his campaigns from the commercial banks. According to collections and statistics, it was found that the total contributions for the campaign amounted to over $1.9 million.

It doesn’t matter if Hensarling finally becomes the Treasury Secretary or not but his ideas and influences have already started affecting the upcoming changes regarding the CFPB. The reforms suggested by the Trump transition team is almost identical to the proposals that Hensarling previously proposed.

The Possible Changes

The most prominent opposition and appeal for changes are not made from the Transition team or even the anti-CFPB activists but from the courts. It is the head of CFPB, Dr. Richard Cordray whose power and authority has come into question. Most of the Congressmen were really upset about him coming into power and even opposed in the initial days until he was vetted by the legislature.

According to the implied rules, even the President cannot simply evict the director of the agency as per his wish. It would require a reason and implied proofs as to the show the incompetence for the removal of the director from the post he is serving.

Many of the enthusiasts are pretty much assured that Cordray might have to end up packing up his desk and come out of power after his term ends in the first month of 2018. People are speculating that the transition team under Trump has already decided on a replacement for the position and will appoint them once the former head retires. While the prior CFPB was unconstitutional, the newest changes might see the agency as a multi-membered group headed by a qualified interim director. The funding that currently comes from the federal reserves might switch to the congress. This prior proposition has been made around since the last five years but none of it has been applied till now.

The several of the bank-backed lawyers have tried to throw some light on the less talked about controversies regarding the fast cash loans and the forced arbitration which might come in handy whilst trying to dismantle or reinforce several laws under CFPB. A number of pending changes in the financial services are still in question based on the future of the head of CFPB, Cordray.

Financial policy of Trump- Indicators to watch out for

Imagine it is the mid of the month and you need some money and your salary has all been spent in mortgages and bills. Cash advance loans to your rescue. These are the loans taken for very short period and are payable on your next payday. Easily available, these loans are beneficial as well as have some disadvantages.

After the election of Donald Trump in Oval office, the speculation has been rife regarding the financial services and their regulations. Experts such as bank lawyers and analysts are deeming the changes in the finance arena.

As Mr. Donald Trump has already stated that he will look to dismantle the Dodd-Frank Act with his financial services team but on the other hand Charles Schumer, the incoming Senate Minority Leader says that he has votes to block the repeal of the law. This is the most distinct sign of impetuous disagreement over few issues, case in point Dodd-Frank Act.

The other signs of the clash come from different parties such as political rivals. Senator Elizabeth Warren is the force to look out for. The number of democrats supporting her would give a clear indication if the whole senate would be united in opposition to the administration. Above mentioned are the views of Eric Mogilnicki, who is a partner with Covington & Burling in Washington. The short term signals to watch for financial reforms are-

FED vice chair position

The empty position of Vice-chair for supervision at Federal Reserve was made by the Dodd-Frank Act but was never filled. If it is filled now, it would mean that even the other rules of the act are questionable, says Ed Mills who is a financial institutions analyst with FBR & Co. He further says that this move means to nominate Fed Governor Daniel Tarullo’s boss who was in effect looking after the functioning of the empty position.

Authoritative voice

Everyone will be looking for authoritative voice on what will happen and how. Not only the key position but also the low-tier appointees might play a huge roles and important roles.

People want to know the next authority figure in the finance arena. But they are asking in hushed tones. Mills says that the Republicans might play a bigger role than previous congresses. As the President has not articulated the policies clearly, it is very much possible that others will spell out the agenda. Republican congress has well-articulated policy positions which suggests that they will have the power of influence.

Energy & infrastructure boost

Financial regulatory reform in itself might not be a priority but infrastructure and energy sectors will need these reforms for their growth, thus it will be introduced as a way to speed investment says Margaret E. Tahyar, a partner in New York with Davis Polk’s financial institutions group. She also said that Republican coalition needs to deliver growth and jobs in heartland which invariably means to free up the banking and financial services to make investments in infrastructure, energy, and small and medium-sized businesses.

CFPB test

Consumer Financial Protection Bureau, which is a brainchild of Elizabeth Warren is also being followed closely as it has asked federal appeals court to rehear October ruling. Right now President could remove CFPB director Richard Cordray anytime. Including other things CFPB can expedite big enforcement cases which are close to be finalized.

DOL fiduciary rule-

Department of Labor’s fiduciary rule is also something which has everyone’s eyes on it, if it is delayed as is expected of President Trump that means financial services policy is in full play. This suffices to say that the future of cash advance loan is uncertain.

Consumer Mortgage Complaints Highlighted in Latest Report from CFPB

It looks like consumers are still having a lot of issues when it comes to the servicing of their mortgage loans. Additionally, lots of people have been complaining about it being difficult to make their loan payments to their lenders. All of this information comes via the most recent monthly complaint report from the folks over at the Consumer Financial Protection Bureau. As of the beginning of April, the CFPB has taken in almost 856,000 consumer complaints related to the various financial products/services that the bureau currently regulates.

A Breakdown of Consumer Complaints made to the CFPBquestioning-nerd

In this report, there were listed 5,111 complaints related to mortgage issues filed in March of this year. That makes for a 13 percent increase from the previous month. There were also a little over 4,600 mortgage complaints that came in during the first quarter of 2016. That is an over 20 percent increase from the 3,800 complaints that came in during the first quarter of 2015. Going back to when the CFPB first started taking and keeping track of complaints from customers – back in 2011 – the average number of mortgage complaints per month is 4,217. As of right now, nearly a quarter of a million mortgage complaints have been filed altogether.

Nearly 51 percent of mortgage-related consumer complaints had to do with people having a difficult time paying their mortgage properly. Across the country, the CFPB reported that the monthly average number of complaints about debt collection complaints comes in at 6,818. Overall, the debt collection industry is responsible for nearly 26 percent of all complaints as of the beginning of the 2016 second quarter. Student loan debt complaints took their biggest leap so far, with an increase of 83 percent, due to 1,154 complaints logged in March.

Other Consumer Complaints in the CFPB Report

In the CFPB’s latest report, consumer complaints from the state of California were singled out. In this state, consumers logged 118,900 complaints to the CFPB as of the first of April. Mortgages appear to be the most complained about financial product in this state, which makes sense when the national trends are looked at. Debt collecting in California, however, seems to be less problematic than it is across the country. Debt collection complaints in California accounted for about 24 percent of all the complaints officially received. Of the five highest population states, California had the greatest overall leap in consumer complaint volume, with a growth of about 16 percent, when the stats from the first quarter of 2015 and 2016 were compared.

The Origins of the Consumer Complaint Database

The online source that consumers can use to log complaints about the financial industry is officially called the Consumer Complaint Database. It began in 2012 and was intended to be an online source for consumers to submit feedback and complaints about financial products/services directly to the CFPB. The CFPB is responsible for maintaining this data and following up on the complaints that are logged. Additionally, the CFPB makes regular reports that highlight the most troubling issues, as well as providing a general idea of consumer issues to the general public.

CFPB Needs to Make Better use of its own Consumer Data

With the CFPB making it a point to target industries, like the payday lending industry (which receives almost no complaints made to the CFPB database) it makes one wonder when the bureau will get its priorities together and begin to focus its resources on the sectors that are so far responsible for the lion’s share of consumer complaints.

One Thing Rich People do that we ALL Need to Start Doing Right Now

By now, most of us know that it is wise to put money away in savings, and that we should all be doing this more than we already are. However, saving money is not always easy. One group that has seemingly no problems saving money, however, is the richest people amongst us. The super wealthy seem to have this whole saving money thing down to a science.Save-Money-1-537x402

This should not surprise any of us, but the reason that the super wealthy are able to put money aside is not simply that they have more of it to play with. A recent survey conducted by the Bank of America U.S. Trust – the division of the bank that manages private wealth – found that a large portion of wealthy individuals actually started the habit of saving money back when they were teenagers. The survey drew data from about 700 people, and was designed to offer insight at the behaviors and attitudes of very rich people. The respondents in this survey had to have a minimum of $3 million in assets, and 30 percent of them have in excess of $10 million.

More than anything, this report shows the discipline and responsible behavior that wealthy people seem to adopt early on in life. On average, the study shows that these folks started seriously saving money when they were around 14 years old. This should not be surprising, as other studies have shown that about half of teenagers in this country have some type of savings account. We must consider the fact that many rich people are born into money. Still, though, the fact that they start to save money early on could be because they have financially responsible people around them more so than any innate ability that they have to make saving money a priority.

However, the study showed something unique with regards to when these people started working for income and investing money in stocks. Most of them started working regularly at 15 and started investing in stocks at 25. These figures are a bit different from the rest of the population, where most folks start working when they are 16. And data from a Fed report shows that just under 14 percent of total U.S. households own any stock at all.

Another interesting thing that can be learned from this survey is just how these people were able to build up so much monetary wealth. Across the board, about 52 percent of their wealth came in via regular income, and 32 percent came in from outside investments. Related studies seem to show that most of this wealth winds up going into savings accounts of one form or another. Published data shows that most households that save only put about 5.4 percent of their money into savings, while the wealthiest one percent of the country manages to sock away as much as 51 percent of their money.

Most of us don’t have the luxury of being born into a lot of money. And the majority of people in this country don’t really take time to learn a lot about finances. However, we can all see that wealthy people clearly value saving money as a lifelong habit – and one that it started off early in life. The rest of us may not be able to save as much as those folks, but we can benefit from the lesson learned and begin to put as much of our income away in savings as possible. That way, we can be prepared for emergency expenses, retirement and maybe even have some left over to pass on to our children one day.