Top 5 Reasons to Avoid Bankruptcy in Illinois and Opt for Debt Settlement Using Benveniste Law Offices
Consumers may take several risks when applying to certain types of loans. Fortunately, the Consumer Financial Protection Bureau (CFPB) has implemented new rules and regulations to protect borrowers from the risks associated with both long- and short-term loans, which typically have balloon payments. These kinds of loans that usually come in the form of payday or vehicle title loans are often issued online or in stores to people who need fast cash and have difficulty obtaining bank loans.
The CFPB has asserted that creditors who give these types of loans to consumers rely on unfair practices that result in the borrower being unable to pay them back. As a result, the agency hopes to force the payday loan industry to follow the standards established by the credit industry.
The Type of Loans Affected
The CFPB asserts that the new rules and regulations are for:
- Short-term loans that last for 45 or fewer days.
- Long-term loans with interest rates greater than 36 percent annually and use the person’s bank account as leverage for repayment.
Payday and title loans are usually under $500 but are due for repayment within 14 to 30 days. In most cases, the borrower uses their vehicle as collateral or gives the lender access to their bank account. This means that if a person is unable to pay back the loan, the lender or creditor will take possession of the car or make withdrawals from the individual’s bank account. The borrower can avoid such penalties by rolling their debt over into a subsequent loan, which only ends up putting them into a vicious cycle of debt.
New Rules for Payday Loans
The CFPB acknowledges that the practices of the payday loan industry are detrimental to consumers, as they lead to further borrowing and more debt. The industry argues that it’s allowing consumers with lower incomes to obtain loans or credit. The new rules and regulations are slated to go into effect within 21 months. They state the following:
- Creditors are required to determine whether a consumer will be able to pay back a loan before issuing one. The process must take into consideration the individual’s monthly income, expenses, and any outstanding debts.
- After issuing three loans to a borrower, the creditor must wait 30 days prior to issuing another.
- Creditors must inform the borrower in advance if they plan on withdrawing money from the individual’s bank account. Creditors also must stop trying to debit a bank account after two unsuccessful attempts, unless the person gives explicit permission for the creditor to do so.
It’s important to know your rights as a consumer. If you have had an unfavorable situation with payday loans, get in touch with a skilled debt collection lawyer as soon as possible. The experienced Illinois debt settlement attorneys at Benveniste Law Offices can help you resolve your debt on the most favorable terms. We understand that long-lasting debt issues can prohibit you from progressing financially and securing loans for pertinent life purchases. Contact us today for a free case evaluation to discover your debt relief options.
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