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"Draconian" Regulations Reduce Consumer Choice



(p. B1) The Consumer Financial Protection Bureau, the watchdog agency set up after the last financial crisis, is poised to adopt strict new national rules that will curtail payday lending.


. . .


(p. B6) A sweeping study of bans on payday lending, scheduled to be published soon in The Journal of Law and Economics, found similar patterns in other states. When short-term loans disappear, the need that drives demand for them does not; many customers simply shift to other expensive forms of credit like pawn shops, or pay late fees on overdue bills, the study's authors concluded.

Mr. Munn, who works as a site geologist on oil wells, first borrowed from Advance America eight months ago when his car broke down. He had some money saved, but he needed a few hundred more to pay the $1,200 repair bill. Then his employer, reacting to falling oil prices, cut wages 30 percent. Mr. Munn became a regular at the loan shop.

He likes the store's neighborhood vibe and friendly staff, and he views payday loans as a way to avoid debt traps he considers more insidious.

"I don't like credit cards," said Mr. Munn, who is wary of the high balances that they make it too easy to run up. "I could borrow from my I.R.A., but the penalties are huge."

At Advance America, he said, "I come in here, pay back what I've taken, and get a little bit more for rent and bills. I keep the funds to an extent that I can pay back with the next check. I don't want to get into more trouble or debt."


. . .


The rules would radically reshape, and in some places eliminate, payday borrowing in the 36 states where lenders still operate, according to Richard P. Hackett, a former assistant director at the Consumer Financial Protection Bureau.


. . .


"It's a draconian scenario," said Jamie Fulmer, an Advance America spokesman.



For the full story, see:

STACY COWLEY. "To Curb Abuse, Loan Rules May Cut a Lifeline." The New York Times (Sat., JULY 23, 2016): B1 & B6.

(Note: ellipses added.)

(Note: the online version of the story has the date JULY 22, 2016, and has the title "Payday Loan Limits May Cut Abuse but Leave Some Borrowers Looking.")






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