According to agreements between Tennessee Republican Senator Bob Corker and Connecticut Democrat, Senate Banking Committee’s chairman, Christopher J. Dodd, a proposal would allow the new consumer protection agency the authority to write rules for non banking institutions like Payday Loan Lenders, however, it would not be able to enforce the rules. Instead, the agency would have to petition a group of regulators to enforce the rules. Many argue that having the ability to write rules but not the ability to execute them would be almost useless.
Will new regulations really help the payday loans industry and the economy? Here are some thoughts to consider:
- What new regulations will be made into law and are they plausible?
- Who will be a part of the board of members regulating non bank lenders?
- Payday lenders have contributed about $10 billion to the economy in 2007 and responsible for the employment of 77,000 people. Regulators who put caps on interest rates or force payday lenders to cut costs through discharging employees will be furthering dampening the economy, especially when these types of alternative loans are one of the few lending options left. Traditional bank loans are difficult to come by, even with good credit, so those without the collateral, income, or credit could qualify for payday loans. If payday loans become unavailable, where will people get loans?
- If the new consumer agency can only write rules and would require another body of legislation to enforce them, how cost and time effective will this be?
There are still many unambiguous questions to be answered and we hope that all things are addressed before things come into effect.