Wednesday, as the Senate rejected an amendment to the financial reform package that would have tightened regulation on loan company, consumer credit sources pulled off a narrow escape. The legislation was going to exert federal restrictions on an industry regulated at the state level. Provisions within the payday loans no fax amendment would have limited consumer access to same day cash loans and prohibited cash companies from offering additional products and services.
Financial reform bill and the debate
The Senate financial reform package involves a new consumer protection agency with broadly defined authority that has aroused concern across the financial industry, from giant Wall Street banks to car dealers who help customers with loan applications. The Wall Street Journal reports that the payday loan amendment within the financial reform bill, that was really introduced last month by Democratic senator Kay Hagan of North Carolina, would have prohibited payday loan companies from selling or providing other services or products within the very same location that they give payroll loans. It would have also limited consumers to only be able to get six payday cash advances a year. The Federal Reserve Board would take control of the cash industry.
Timely credit offered by payday loans
Personal loan company actually offer many advances on paychecks for people who need short-term help for such things as unexpected car repair, emergency room charges or the opportunity to take advantage of a special offer. Payment happens after receiving the borrower’s next paycheck. The Chicago Tribune reports that cheaper methods for covering expenses when cash is short aren’t as convenient or readily available — including credit cards — and are a lot tougher to get now, especially after the financial meltdown.
The gap bridged by payday lenders
Because they are satisfying consumer needs while conventional banks leave many consumer with no alternatives, private money lenders are doing well. The Tribune article mentions that a recent government report found that 9 million U.S. households don’t have a checking or savings account, and millions more do not use them regularly. Even though payday borrowers and lenders have escaped federal restrictions for now, the industry is regulated by states with a hodgepodge of rules and outright bans.
Payday loan amendment dismissed
Senate has been debating on the financial reform package for weeks. Senator Hagan needed unanimous consent for a discussion when she tried to put up her amendment for debate Tuesday afternoon. The payday loan amendment will be left out of the financial reform bill for now because she failed. The stock market made a comment about the senate’s rejection on Wednesday. Cash America International Inc. was up by 4.1 percent leading it to $ 36.82, Ezcorp Inc. rose 3.4 percent to $ 18.76, Advance American Cash advance Centers Inc. climbed 6.8 percent to $ 4.72 and First Cash Financial Services Inc. was up 2.3 percent to $ 21.86.
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Wall Street Journal reports
http://online.wsj.com/article/BT-CO-20100519-712661.html?mod=WSJ_latestheadlines
Chicago Tribune reports
http://newsblogs.chicagotribune.com/burns-on-business/2010/05/lawmakers-target-payday-loans.html
