CFPB Tag

The nation's payday and auto title lenders are now the latest target of the Obama administration in an effort to transform the relationship between private lending companies, their borrowers, and the government. For the very first time, high-interest lending companies will face regulations set forth by the federal government. Credit of this type typically involves an immediate, short-term loan of a few hundred dollars that comes with a high interest rates and lending fees. When costs are combined, the annual interest rate of these loans often calculate to around 300%. Until now, regulation of this $39 billion industry had been left up to the states. This week, the Consumer Financial Protection Bureau (CFPB), an agency conceived by Sen. Elizabeth Warren, announced the beginnings of a regulatory framework intended to protect the roughly 12 million low-income households borrowing from these often described "predatory" lenders. Rules proposed by the CFPB will require lenders to assess the borrower's ability to pay back the loan before an exchange of money takes place. Payday lenders fear this step will make it more difficult to roll over loans, a frequent practice of high-interest lenders that usually results in the hiking of the lender's borrowing fees.