Regulations are Apparent in the Payday Loan Industry
It seems almost daily there are some new bills or proposals in one of the many state's legislatives systems either regulating or overseeing the payday loan industry. With some many new regulations and oversight going on in the industry, it's a wonder how and why local payday loan companies even try to continue. Or is it?
The fact is that many people in this country cannot borrow traditional types of loans for mired of reasons like poor credit history, lack of consistent income, or even just being over extended on credit. However, these people need to borrow money in emergencies so there is no where else for them to turn but short term payday loans. Knowing there are individuals out there that need money quickly and easily, payday loan lenders are fulfilling a need that is set by the American people. Therefore, lenders want to fight for their industry and continue to provide people with the options they need to get money quickly and easily.
Not all regulations are bad, and not all regulations works the way they are supposed too. For example, a new bill passed by the Kentucky State House on February 25th, 2009 requires the state to create a database for all short term high interest loans to be able to track how many loans an individual has as well as which companies are providing loans to them. The state had passed a law last year regulating individuals to no more than 2 loans at any given time. However, the state did nothing to track the number of loans or even enforce it's own law. That is why the new law passed in the house would help to enforce the already in place regulations. The payday loan industry did not even try to fight this bill as they feel that creating a database wouldn't hurt them at all or limit what they can do for people, but rather help keep track of what the industry is doing. However, reps for the industry did say that any further regulations would certainly be met with resistance.
This means that the industry respects the needs of the individuals and wants to work with regulators to ensure that the industry is meeting the goals of the consumers who use them, as well as continue to operate at a profit, since this is a business. However, some states have completely ban payday loans, and other states are trying to move in that direction, but often with each new law comes a loop-hole that lenders are still able to work within and sometimes the regulations even hurt the ones that they are trying to help.
For example, in Illinois, they've passed a new law on February 25th, 2009 that would ban open-ended loans, which are high interest short terms loans that many loan providers started to get into when the state had put tougher regulations on payday loans. The lenders in the state had found a loop hole in the bill that allowed them to continue operating, and even offering higher interest rates than before the bill had passed. This means that the state tried to regulate the industry, only to find out that they hadn't closed every door and so in fact their regulation ended up hurting people more because they were getting into these open-end higher interest loans instead of traditional payday loans. However, the state has now set up to close that door by banning open-ended loans and requires lender to follow the tougher payday loan laws that had past in the state last year.
These laws, as well as many other laws in the states have all been put into place to protect consumers, but there are times when the laws are not helping consumers and are merely costing the tax payers money in debate and political considerations. If the state's really wanted to help people they would also try regulating fees from credit card companies in addition to capping limits on payday loans.
