Credit scores are used by creditors and lenders to determine whether they will lend you money and what terms (interest rate, how much, etc.) you will be offered. Boosting your credit score will result in considerable savings—better loan terms and lower interest rates. Interest-only and other sub-prime mortgage loans—those with less than stellar terms sold to borrowers with low credit scores or not enough money—have resulted in foreclosure for many homeowners when they couldn’t afford the hiked payments.
When the republican governor of California, was elected, he had promised that he would cut State spending and help private business grow and it seems that he was able to do just that but apparently not to benefit of the residents of California but the California’s banks and credit unions.
According to an article on Bloomberg, Banks and Credit Unions in California will now offer zero interest loans to over 200,000 State employees whose salaries maybe reduced to minimum wage.
“We’re trying to show our support for our state-employee members,” claims Golden 1 Credit Union’s Donna A Bland.
But are they really? Anyone knows that by reducing one person’s employee and offering them installment loan, even a zero interest one, only means trouble. It keeps them under further debt, takes away their ability of paying back the loan or living paycheck to paycheck, which makes them more vulnerable financially for more loans. And when they run out of 0 interest loans, then they start taking interest based loans and even high interest loans including short and long term loans such as payday loans.
The consumer agency created by the Dodd-Frank legislation we mentioned previously may not be able to regulate non-bank entities such as Ameriquest, Countrywide Financial, New Century Financial and other lenders, which are currently exempt from federal regulation. In case you need a refresher, the Dodd-Frank Act allowed for the creation of a committee to regulate the financial industry. This committee known as the Consumer Financial Protection Bureau is set to enact national regulation that will affect pay advance lenders along with many other types of financial institutions.
The agency, temporarily headed by Elizabeth Warren, is in need of a permanent director. According to a report by the inspectors general of the Treasury Department and Federal Reserve, the Trump administration needs to get a nominee approved by the Senate by July in order to maintain the power to regulate non-bank financial institutions. That means pay advance lenders, mortgage lenders and other personal loan and cash advance services that are not considered to be banks would continue to be supervised solely by their respective state legislatures.
However, part of the intention of the law was to bring banks and non-banks under the same government oversight, so as not to give non-banks an unfair advantage. Payday lenders, mortgage lenders and other non-bank lenders have been subject to very little federal regulation over the years. Up until now, it has been up to states to oversee the industry. On the other hand, the federal government has regulated and audited banks for many years.
Even if the agency is not able to get a director in place by December, it will still be able to oversee consumer lending by banks worth more than $10 billion. This is because bank regulators already have this authority. In this case, though, the agency would not have the new authority to regulate non-banks.
As we mentioned before, leading payday industry trade group the Community Financial Services Association (CFSA) reacted positively to the new legislation, agreeing that it would be best to weed out any predatory lenders in the industry. However, a secondary trade association known as the Financial Service Centers of America (FiSCA) has decided to take some preemptive action. This group has moved its headquarters from Hackensack, N.J. to Washington, D.C. in order to gain influence in the legislation to come. Not only are they in the city where the new regulations will be created, but they are two doors down from the offices of the Consumer Financial Protection Bureau.
If the Obama administration isn’t able to push through a nominee to head the agency, this could all become a moot point, but FiSCA isn’t taking any chances. They represent a variety of check cashing stores and payday lenders that could be strongly affected by any new regulation.
For you payday loan borrowers out there, this means the way you get money when you’re in a financial emergency could either change drastically or stay pretty much the same, depending on what happens in the next six months. During that time we will keep you updated on all new developments and make sure you’re informed about news that affects you.