Two editorials yesterday about the Consumer Financial Protection Bureau proposal to regulate payday lenders. (Our post about the proposal, with a link to it, is here.)
A New York Times editorial gives strong support for the proposed rule:
The Consumer Financial Protection Bureau took the most important step in its brief four-year history this week when it issued a preliminary proposal aimed at protecting the working poor from the payday lending industry, which bills itself as a source of “easy” short-term loans but earns its profits by luring borrowers into debt traps. If finalized, rules based on this proposal would protect millions of people from deceptive, predatory loans that can wreck their already fragile finances. The bureau could better protect consumers by closing one loophole that would allow some lenders of relatively small amounts to keep making high-cost loans. …
The full NYT editorial is here.
The Washington Post supports regulation of the industry but has concerns about the CFPB's proposal:
…. Basically, it mandates the kind of underwriting that payday lending characteristically avoids. This could go a long way toward ending, or at least reducing, payday-lending horror stories. But this benefit will probably come at the cost of precluding some mutually advantageous transactions that would otherwise have occurred. Lenders will exit the business. Here and there families will curtail consumption — which is a plus, insofar as it encourages them to live within their means, or a minus, if they have to skip meals. Just as inevitably some high-interest, short-term lending that now occurs legally will be driven into the underground economy.
The full WP editorial is here.