Consumer credit sources pulled off a narrow escape Wednesday as the Senate rejected an amendment to the financial reform package that would have tightened regulation on payday loan companies. The legislation was going to exert federal restrictions on an industry regulated at the state level. Provisions in the payday loan amendment would have limited consumer access to same day cash loans and prohibited cash companies from offering additional products and services.
Source for this article: Senate rejects payday loan amendment in financial reform bill
Financial reform bill and the debate
The Senate financial reform package includes a new consumer protection agency with a very broadly defined authority that has aroused many concerns all across the financial industry, from giant Wall Street banks to car dealers who help customers with loan applications. The Wall Street Journal reports that the payday loan amendment in the financial reform bill, that was actually introduced last month by Democratic senator Kay Hagan of North Carolina, would have prohibited payday loan companies from selling or providing other services or products in the same location that they give payday loans. It would have also limited consumers to six paycheck loans a year. The Federal Reserve Board would take control of the cash industry.
Payday loans offer timely credit
Payday lenders actually offer many advances on paychecks for people who need short-term help for such things as unexpected car repair, emergency room charges or the opportunity to take advantage of a special offer. Usually, the borrower pays it back after receiving their next paycheck. The Chicago Tribune reports that cheaper methods for covering expenses when cash is short aren’t as convenient or readily available — including credit cards — and are a lot tougher to get now, especially after the financial meltdown.
The gap bridged by payday lenders
Because they are satisfying consumer needs while conventional banks leave many consumer with no alternatives, payday lenders are doing well. The Tribune article explains that a recent government report found that 9 million U.S. households don’t even have a checking or savings account, and millions more don’t use them regularly. Even though payday borrowers and lenders have escaped federal restrictions for now, the industry is regulated by states with a hodgepodge of rules and outright bans.
Amendment on payday loans dismissed
For weeks, Senate has debated on the financial reform package. When she tried to put her amendment for debate Tuesday afternoon, Senator Hagan needed unanimous consent for discussion. The payday loan amendment will be left out of the financial reform bill for now because she failed. The stock market made a comment about the senate’s rejection on Wednesday. Cash America International Inc. was up 4.1 percent to $ 36.82, Ezcorp Inc. rose 3.4 percent to $ 18.76, Advance American Cash Advance Centers Inc. climbed 6.8 percent to $ 4.72 and First Cash Financial Services Inc. was up 2.3 percent to $ 21.86.
Read more on this topic here
Wall Street Journal reports
http://online.wsj.com/article/BT-CO-20100519-712661.html?mod=WSJ_latestheadlines
Chicago Tribune reports
http://newsblogs.chicagotribune.com/burns-on-business/2010/05/lawmakers-target-payday-loans.html
