If you're a resident of the Sunshine State, you may periodically take advantage of a payday loan or cash advance to help you bridge the gap between paychecks or help pay an unexpected bill. While these short-term, high-interest loans can provide a safety net for those who often don't qualify for other types of credit, recent reform recommendations by a national consumer law group are set to potentially change the way Florida's payday lenders do business. Read on to learn more about these proposed reforms and how they may affect the lending parameters of future payday loans you may seek.
What reforms to Florida's payday lending industry are being recommended?
Recently, the Consumer Financial Protection Bureau (CFPB), a federal consumer watchdog agency, made a number of sweeping reform recommendations to the payday lending industry designed to make these products more affordable for the average consumer. Some of these recommendations included a strict limit on the number of times a loan could be rolled over or renewed (with additional interest charges), as well as caps on both the maximum interest rate and the amount borrowed. These were designed to eliminate what is commonly referred to as the "payday debt trap," in which consumers who continue to overspend or suffer unexpected financial shortfalls roll a payday loan over rather than paying it off, adding to the balance each time.
However, Florida's payday loan industry had already recommended and implemented similar reforms more than a decade earlier, in 2001. These regulations set a cap on the amount borrowed at $500 (even if you earn far more), interest rates at 10 percent, and a maximum loan term of 31 days. You're not allowed to roll these loans over -- if you fail to repay the loan by the deadline, you may be required to participate in credit counseling or create and stick to a repayment plan, or else you'll be subject to garnishment or a civil collection lawsuit. You're also required to wait at least 24 full hours from the time you pay off your existing payday loan to the time you take out a new one.
The CFPB's proposal puts even stricter standards on the payday lending industry, and lenders have fought back against the implementation of these recommendations, arguing that they would make the cost of doing business too high and likely put most payday lenders out of business. Without access to quick cash, many citizens could find themselves without the means to pay for an emergency car repair, utilities, or health insurance.
What may this mean for your ability to take out payday loans in the future?
Some Florida government officials have argued that the CFPB should adopt its model rather than implement a more draconian one, pointing to a significant decrease in the number of defaulted payday loans. These recommendations are still being debated among various governmental bodies and special interest groups, and do not yet have the force of law.
However, if the CFPB recommendations are implemented on a national level, you may find that most of your local payday lenders will no longer be able to offer loans of more than a couple of hundred dollars, or may close entirely. If you take out payday loans more than once or twice per year, you may want to keep an eye on changes in this area so that you won't be caught by surprise when you need a loan and none are available. You might also prefer to seek payday loans online from sites like http://www.1stchoicemoney.com, as the money can be wired directly to your bank account rather than being provided in physical cash -- perfect when you're not near a brick-and-mortar payday lender.