Bureau puts forward payday lending rules
Bureau puts forward payday lending rules

The Consumer Financial Protection Bureau has decided to take a major step for safety of customers looking for payday loans to bridge the gap between their expenses and earnings. The agency is proposing regulations in order to cut short-term payday loans, usually having interest rates of 400% or more. The agency was created on suggestions of President Barack Obama after the financial crisis.

These rules would be applicable on a large section of the $46 billion payday loan market, which helps many working poor, having no savings and limited access to traditional bank loans. There would be no ban on short-term, high-interest loans that are frequently used in basic expenses. But lenders would have to ensure that borrowers have the resources to pay them back.

The payday loan initiative is an important decision taken for a consumer agency, which is still making efforts to find its grip among other financial regulators and at the same time it is protecting itself against attacks from Republicans in Washington. Last month, The New York Times focused on the payday loan initiative in an article.

On Thursday, Obama talked about the consumer bureau's proposal, in which he said that this would cut the number of unaffordable loans, which could be made by lenders to Americans, who urgently require cash.

Obama said in a statement that if one lends out money, it is necessary to ensure that the borrower is able to pay it back. According to Obama, "We don't mind seeing folks make a profit. But if you're making that profit by trapping hardworking Americans into a vicious cycle of debt, then you got to find a new business model, you need to find a new way of doing business".

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