Feds Consider New Predatory Lending Regulations While Report Shows Auto Title Loans Even Riskier than Payday Loans

Predatory lending has victimized countless Americans who are struggling to get by, living paycheck to paycheck. For years these struggles have gone unaddressed as either governments did nothing to regulate the lenders or predatory lenders found ways to avoid the spirit of regulations by making small changes to their loans but not solving the actual predatory nature of them. Now, however, that may be changing, and it may be changing in a way that prevents some auto repossessions.

Consumer Financial Protection Bureau Proposes New Regulations

The New York Times reports that the Consumer Financial Protection Bureau has proposed regulations that would rein in payday loan lenders, one of the most common types of predatory lenders. The regulations would limit the number of loans these lenders can make. This may bring an end to the practices of borrowers essentially having to take out a continuing stream of payday loans in order to pay off their previous loans. The purpose of the regulations is to insure that borrowers can repay their loans including all interest and fees without having to take out more loans to cover the debt. They would require creditors to assess borrowers; income and financial obligations in order to do this. This would fundamentally change the pay day loan industry as a whopping 75 percent of the fees generated by these companies are accrued by borrowers who take out 11 or more loans. The agency is also considering provisions that would require the lenders to provide an affordable way for borrowers to get out of debt before they could make a second or third consecutive loan. These regulations would apply to auto title loans as well as payday lenders.

Auto Title Loans Which Result in Auto Repossession Can be Worse Than Payday Loans

NBC News reports that auto title loans are even riskier for consumers than their payday loan counterparts. In these loans a borrower keeps his or her car but signs over the title to the lender. The car acts as collateral. Then when the borrower cannot pay back the unaffordable loan the predatory lender repossesses the car. According to a report by the Pew Charitable Trusts these loans often require balloon payments that the borrowers cannot afford. This means that borrowers have to either keep taking out additional loans to make the payments or lose their cars which can result in lost jobs. A major issue with these title loans is that they are often for larger sums than payday loans and they often come with larger fees. The average title loan is for $1000 and comes with a $250 fee. That total $1250 is usually due in 30 days, and most of the borrowers have no way of coming up with that much money in that short of time, as since it accounts for half of the average borrower’s average monthly income. Borrowers who do not take out more loans often see their cars repossessed.

What Can You Do If You Fall Behind?

There are both federal and state laws already on the books that you can use to protect yourself against these predatory lenders. One such federal law is the Truth in Lending Act. There are also various state and federal agencies that can be of help, depending on what specific type of predatory lending is happening. In order to exercise your rights you will want an experience consumer protection attorney on your side, which is why you should contact an attorney like Brian Bromberg.