Federal regulators propose restrictions on payday lenders
NEW YORK (AP) – Federal regulators are proposing a significant clampdown on payday lenders and other providers of high-interest loans, saying borrowers need to be protected from practices that wind up turning into “debt traps” for many.
The Consumer Financial Protection Bureau’s proposed regulations seek to tackle two common complaints about the industry.
The CFPB is proposing that lenders must conduct what’s known as a “full-payment test.” Because most payday loans are required to be paid in full when they come due, usually two weeks after the money is borrowed, the CFPB wants lenders to prove that borrowers are able to repay that money without having to renew the loan repeatedly.
Secondly, the CFPB would require additional warnings and restrict the number of times payday lenders can attempt to debit a borrower’s bank account.