Katherine E. Adkins of Mayfield, Northampton represents what regulators are targeting for predatory lending. Adkins was arrested for offering illegal payday loans secured by the borrower’s future payroll. After paying a fee, borrowers attempted to deposit checks from Adkins. Banks would not accept the funds and ultimately tipped off police. However, after paying fees to Adkins, borrowers were left deeper in debt than when they first sought the loan. Emergency short-term loans, often called Payday loans, and online lenders are facing intense scrutiny in part due to people like Adkins.
Regulators are also asking that borrowers be more responsible with emergency loans. Another woman, Tameka Massengale, borrowed $300 from a payday lender in Detroit so she could fix her car. When she couldn’t pay the $300 and the $60 fee out of her next paycheck, she reloaned the money for another $60 fee. This went on and on.
New Rules Are Making Borrowing Safer
Things are changing in this industry. New systems are in place to reduce these risks. These new regulations aim to provide borrowers better information with spelled out fees and charges. This makes it more obvious what the cost to missing payments really is. These loans make it possible for consumers to borrow more responsibly. Nationwide, lenders are required by law to show price comparisons – giving consumers a full view of what they can expect to be charged. The law mandates that borrowers be given at least one price comparison from a competing lender.
By doing this, the goal is to ensure borrowers make the best decisions for themselves. It doesn’t take away the benefits of emergency lending but has begun to decrease abuse.