The Consumer Financial Protection Bureau (CFPB) had released a potential outline of regulations to control payday lending back in the March, this year. It was specifically meant to address the debt trap problem for the borrowers which often occurs because of the small dollar loan programs. Various consumer groups have come forward since then to show their support towards this move taken by the CFPB. However, many of these groups felt the need for an ever stronger action for effectively controlling the poor credit practices by the leading loan sharks in the nation.
To take things to a new level, the Pew Charitable Trust has come forward with a video that showcasing the problems and the possible solutions for consumers who borrow payday loans in the country. It is meant to guide and offer a helping hand to the approximately 12 million genuine American borrowers and the problems faced by them. The Pew Charitable Trust has comprehensively studied the payday lending industry and the possible negative effects of payday loan borrowing on the prospective borrowers. This video shows that the CFPB and the small dollar loan providers can devise ways to make these loans safer for the average borrowers.
The video also shows how such loans can be made more approachable for borrowers facing a temporary financial crunch. According to the Pew Trust, around 12 million Americans spend about $17 billion in the payday loans in a single financial year. This data represents the 36 states of the United States of America where small dollar loans have been accredited legal status. The video released by the trust narrates the story of a borrower named Jennifer, who borrows a small dollar loan of $375 to help her pay her pending bills. She fails to pay back the loan along with interest only to become trapped in the never-ending cycle of debt.
The Pew Trust says that the reason behind such scenario is the high interest rates and an unmanageable or unachievable repayment schedule. The video also shows the reasons –‘why borrowers like Jenifer opt for the difficult payday loans in the first place?’ The Pew trust also says – that these short term loans are often difficult to payback within two week’s time, resulting in increase in the number of defaulters. It becomes very crucial and difficult for a borrower to pay these loans within the tight deadlines between two consecutive pay checks.