Archive

Go to:

August 2017
SMTWTFS
12345
6789101112
13141516171819
20212223242526
2728293031
< Jul Sep >
Leaguer Email Subscription

You are not currently subscribed. Click Subscribe below to receive the Leaguer email.

CFPB Finds Payday, Deposit Advance Loans Trap Consumers in Debt
Friday, April 26, 2013 7:55 AM

cufbl_-_2013_regional_lender_of_the_year_award_4-17-13_1.JPG

The Consumer Financial Protection Bureau (CFPB) has  issued a report on payday and deposit advance loans finding that for many consumers these products lead to a cycle of indebtedness. Loose lending standards, high costs, and risky loan structures may contribute to the sustained use of these products which can trap borrowers in debt.

“This comprehensive study shows that payday and deposit advance loans put many consumers at risk of turning what is supposed to be a short-term, emergency loan into a long-term, expensive debt burden,” said CFPB Director Richard Cordray. “For too many consumers, payday and deposit advance loans are debt traps that cause them to be living their lives off money borrowed at huge interest rates.”

The Payday Loans and Deposit Advance Products report is at: http://files.consumerfinance.gov/f/201304_cfpb_payday-dap-whitepaper.pdf.

The report found many consumers repeatedly roll over their payday and deposit advance loans or take out additional loans; often a short time after the previous one was repaid. This means that a sizable share of consumers end up in cycles of repeated borrowing and incur significant costs over time. The study also confirmed that these loans are quite expensive and not suitable for sustained use. Specifically, the study found limited underwriting and the single payment structure of the loans may contribute to trapping consumers in debt.

To help educate consumers about payday and deposit advance loans, today the CFPB updated its Ask CFPB web tool to assist consumers with their financial questions about these products.

 

A factsheet about payday and deposit advance loans is available at: http://files.consumerfinance.gov/f/201304_cfpb_payday-factsheet.pdf