Times have not changed; families are still struggling to survive living from paycheck to paycheck. This has become a routine that many families have adopted because they just cannot seem to get caught up on bills and get ahead. As their circumstances get even worse, where do they turn to get money? With the loan industry tightening up on credit worthiness, having bad credit, too little credit, or even no credit will not suffice to get a loan or credit card during hard times. Payday Lenders have stepped in to offer short-term loans for money with no credit check, with the guarantee of repayment on your next payday plus additional fees. The fee might seem like a simple one time charge, but a fifteen dollar fee on one hundred dollar loan that
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According to Barth and Jahera (2016) it is time to let banks compete with payday lenders. Payday lenders contend that they have higher loans rates because they are run by small business owners who “spend up to two-thirds of their revenue to run their stores and they have to pass this cost on to the customer” (Barth & Jahera, 2016). Banks and credit unions could offer a promising alternative for short-term loans with smaller annual interest rates. The CFPB is looking at processes that would allow banks to offer installment loans with smaller payments and be less costly to service them. But The Office of the Comptroller of the Currency could require banks to conduct full underwriting and that would cause these short term loans to be very expensive and interest rates would be as high as payday loans (Barth & Jahera, 2016). Research done by Pew Charitable Trusts: “estimates if banks are able to use the CFPB streamlined procedures they could offer loans profitably at prices six times lower than payday lenders” (Barth & Jahera, 2016). This would open up many opportunities for banks and …show more content…
Pew Charitable Trusts conducted research to determine what customers will likely do if faced with this problem. Most people would cut back on expenses, delay paying some bills, rely on friends and family, or sell personal possessions (Bourke, Horowitz & Roche, 2012). It was not a surprise that many did not list getting a loan from the bank or a credit card as an option because they knew they would not qualify. This study also revealed that many consumers would prefer getting loans from banks or credit unions than payday lenders if they felt it was an option available to them (Bourke, Horowitz & Roche, 2012). Online payday lenders have started businesses, but Consumer Advocates as well as storefront lenders warn against this type of lending because they are out of reach of state regulators. Pew Charitable Trusts reports: “evidence of fraud and abuse among other things from online lenders” (Bourke, Horowitz & Roche, 2012). So getting loans from online lenders is not a safe option for
According to Barth and Jahera (2016) it is time to let banks compete with payday lenders. Payday lenders contend that they have higher loans rates because they are run by small business owners who “spend up to two-thirds of their revenue to run their stores and they have to pass this cost on to the customer” (Barth & Jahera, 2016). Banks and credit unions could offer a promising alternative for short-term loans with smaller annual interest rates. The CFPB is looking at processes that would allow banks to offer installment loans with smaller payments and be less costly to service them. But The Office of the Comptroller of the Currency could require banks to conduct full underwriting and that would cause these short term loans to be very expensive and interest rates would be as high as payday loans (Barth & Jahera, 2016). Research done by Pew Charitable Trusts: “estimates if banks are able to use the CFPB streamlined procedures they could offer loans profitably at prices six times lower than payday lenders” (Barth & Jahera, 2016). This would open up many opportunities for banks and …show more content…
Pew Charitable Trusts conducted research to determine what customers will likely do if faced with this problem. Most people would cut back on expenses, delay paying some bills, rely on friends and family, or sell personal possessions (Bourke, Horowitz & Roche, 2012). It was not a surprise that many did not list getting a loan from the bank or a credit card as an option because they knew they would not qualify. This study also revealed that many consumers would prefer getting loans from banks or credit unions than payday lenders if they felt it was an option available to them (Bourke, Horowitz & Roche, 2012). Online payday lenders have started businesses, but Consumer Advocates as well as storefront lenders warn against this type of lending because they are out of reach of state regulators. Pew Charitable Trusts reports: “evidence of fraud and abuse among other things from online lenders” (Bourke, Horowitz & Roche, 2012). So getting loans from online lenders is not a safe option for