Consumers in Connecticut and throughout the country will soon get a break against the debt traps that place unreasonable burdens on them to pay back all or most of certain debt obligations at once. The Consumer Financial Protection Bureau (CFPB) just finalized a rule that requires certain protections regarding payday loans, auto title loans, deposit advance products and balloon payments in some longer-term loans. The relief will assist some consumers in facilitating better debt management measures to keep their debt from burgeoning out of control.
These types of loans often utilize predated checks that are used to pay off short-term loans, usually made in smaller amounts that are theoretically going to be paid off by the borrower’s next paycheck. In auto title loans, a short-term loan is granted on the basis of the borrower’s auto title being put up for collateral. The borrower may have to put up access to his/her checking account or auto title to get a longer-term loan that has a balloon payment at the end.
Many of these loans have annual percentage rates of 300 percent or higher. The consumer often gets into a vicious cycle of borrowing again and again or obtaining new debt in some form or another rather than paying back the debt on the payment date. The CFPB has approved a new rule that will require lenders to do an upfront study to establish that the borrowers can afford to repay the loan and still make their living expenses and financial obligations.
The rule also encourages less risky payment plans that borrowers will be able to control through workable debt management measures. There are various other protections that the consumer should review and understand. It may take up to 21 months for some of the provisions to become effective. Any persons in Connecticut who are burdened with unmanageable balances of high-risk, unsecured debt and/or overwhelming credit card or medical debt may benefit by obtaining a free consultation with an experienced consumer bankruptcy attorney to learn what options and rights are legally available.
Source: consumerfinance.gov, “CFPB Finalizes Rule To Stop Payday Debt Traps“, Oct. 5, 2017