New legislation is on the horizon for online and bank offered payday loans, cash advances. A new bill has been introduced as a much needed response to Native American Tribes and bank short-term loans which are presently not required to follow state short-term loan regulations.
Aggressive predatory lending and collection practices have been and continue to be a driving force in regulating cash advance lenders. Some states have banned the lending practices all together while others have capped fees and loan amounts in order to protect the residents from falling further into debt. As of now, Native American tribes hold control of lending companies affiliated with tribal members. Sovereignty was given to tribes by the U. S. government. National banks are not subject to state regulations for cash advance lenders. In the meantime, these establishments continue to process loans without any regulatory guidelines or limits.
The SAFE Lending Act is looking to group all lenders under the same regulations.
*All online short-term lenders will comply with state regulations if it protects consumers better than federal law.
*Prevent banks and Native American tribal lenders from processing loans in violation of state laws.
*Provide new federal enforcement of such laws to further protect consumers.
*Empower Native American Tribes to get help with protecting members from loans processed within tribal lands.
Protecting consumer's bank accounts is another focus of the SAFE Lending Act.
*Looking to close single payment loopholes in electronic fund transfers giving consumers more control over how the lender can access their bank accounts.
*Protect consumer's personal information from lead generators.
*Prohibit lenders from making checks with a borrower's bank account in order to withdraw funds even after consumers have opted out of electronic payment methods. A consumer may use electronic payments as a convenient way to process payments. It is not set up as a collection method for lenders.
It will put all players on a competitive playing field. Responsible lenders will no longer be the minority. People who are looking to apply for an online cash advance will have less worries about which lender is responsible. On a side note (and a very important piece of information to remember) if this bill is passed, it will affect lenders within the U.S., but out of country lenders will not have to adhere to the rules.
With similar loan and fee amounts, lending to the same group of people, cash advance lenders will have to step up their game concerning customer relations and funding responsibilities. If an application is denied by a good lender will no longer feel the need to apply with one that does not follow state regulations. Being a responsible cash advance lender means turning down applicants in order to protect both lender's and consumer's interests.
We will have to see how far this legislation goes and what, if any, changes will occur during the process. There have been many unsuccessful attempts by individual states due to the popularity of the cash advance loan option as well as some heavy political backers. It will be interesting to see how this new bill progresses.
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