TOPEKA, Kan. (KSNT) — A University of Kansas professor was in Kansas City today to discuss predatory payday lending. Regulators are saying borrowers need to be protected from practices that potentially turn into debt traps.
And the cycle begins with borrowers taking out loans from loaners and when it’s time to pay back those loans with an enormous amount of interest rate, some burrowers aren’t able to do it. So they take out another loan and the cycle continues.
First, the Consumer Financial Protection Bureau or CFPB wants lenders to prove that borrowers are able to repay money with renewing a loan. Second, require additional warning and restrict the number of times payday lenders could attempt to debit a borrower’s bank account.
Housing and Credit Counseling say they’re a better alternative to an endless cycle.
“Say, typically, someone is in debt,” Renee Earwood, Housing and Credit Counseling employee said. “They would come see us and what our job as counselors are is to look at their big financial picture.”
Businesses like Housing and Credit Counseling will look at a customer’s goals, review their budget and try to help them come up with a plan on their own to help them get out of debt. Credit counselors will also negotiate debts with lenders and offer debt management programs.
“For example, if there was a payday lender, we would contact them with the clients and see what options are available to them and try to help them, you know, workout a payment plan.”
But, where will people go for loans when they’re not approved at banks?
The Community Financial Services Association of America say they’re the only national organization that promotes responsible regulation in the payday loan industry and consumer protections through the CFSA’s best practices.