Payday loans face tough new restrictions by consumer agency
Mickey Mays, the managing partner of Thrifty Loans in Ruston, Louisiana, said his business is expected to close most or all of its 18 stores, which employ 35 people, if the rules take effect. Thrifty’s profit margins are already slim, he said, and the new restrictions would reduce store sales volume below what they could profitably support.
“We operate in small towns,” Mays said. “If the CFPB withdraws these loans, they must answer the question, what happens next? There are going to be a lot of people who have nowhere to turn in an emergency.
Billie Aschmeller, 49, who lives in Springfield, Ill., Took out a short-term loan two years ago, using her 2002 Chrysler Concorde as collateral. She said she then got stuck – “like a hamster on one of those wheels” – in a cycle of debt.
Ms Aschmeller, who is disabled and lives on a small fixed income from Social Security, said she borrowed $ 1,000 to buy baby supplies for her pregnant daughter. She paid back $ 150 a month, she said, but those payments barely reduced the principal on the loan. A year later, she still owed $ 800.
“They lend you money at these outrageous rates and then they bleed you,” Ms. Aschmeller said. She eventually repaid the loan by selling her car.
The Office of Consumer Affairs and other federal regulators are pushing banks and credit unions to play a role in the market. Many community banks previously offered payday loans, but stopped doing so in 2013 after the Office of the Comptroller of the Currency, a key banking regulator, issued a newsletter discouraging the products. On Thursday, the bureau unexpectedly repealed that directive, citing the new consumer bureau rules.
Keith A. Noreika, the acting currency controller, said he hoped banks would “deliver responsible products” for their customers’ short-term needs.