In Missouri, legislators are seeking to draw up new legislation that would create new regulations to place over lenders throughout the state. Payday loans, a short-term cash advance on the consumer's next paycheck, have constantly been under fire for luring consumers in with quick application processes and high approval rates and then gouging them with ludicrously high interest rates.
These types of patterns have long been considered to place consumers on a cyclical pattern of repeating debt. By treating the short-term problem, many believe that payday loans are simply a way to place the borrowers in danger - giving them a way to get cash fast, but putting them in a hazardous cycle in the long-run.
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For this reason, many states have been seeking new legislation to help limit the ability of lenders and to ensure that the practice is done safely. This Missouri bill is just one of those steps throughout the nation that is being used to help protect borrowers.
In this bill, there would be several, comprehensive steps taken to help protect borrowers against 1) predatory lenders and 2) from their own bad spending and borrowing habits. These regulations would include measures that limit the interest that can be placed on a payday loan. The cap would be placed at $60 for every $100 that the borrower takes out, compared to the previous cap of $75 for every $100.
It would also take steps to reduce what is known as "rollovers." Many lenders allow for borrowers to simply take out a new loan if they are unable to pay off the old loan that they have already used. While this is a good solution for borrowers in a tight spot, it is often a first step towards a steep, slippery downhill slope. This bill would take the current cap at six rollovers down to three rollovers.
Another step that is being contemplated is the idea of a sixty-day payment plan for borrowers to pay back any outstanding loans that they currently have with a lender. During this period, they would not be eligible to accrue more interest and would simply seek to payoff old loans at the rate that they are at. Finally, the bill also seeks to prohibit loans to be taken out if an old loan has just been settled.
The bill found massive support in the House, which is skewed towards the Republicans, and found support in a 96-58 vote. There are, however, many critics of the bill who say that the caps placed in the bill are already outside of the norm for borrowers - many simply do not reach that limit. They call for stricter regulation so that borrowers can ensure that they are safe and protected in their lending.
With bills of this nature going through committees all throughout the country, the spotlight has shifted to looking at some of the unscrupulous actions of many lenders. Just because some lenders, however, take advantage of their customers does not mean that all do. There are, in fact, many lenders that respectably and honorably offer loans to people in trouble, using an expedited and transparent process to help people who find themselves in a bind. If you are currently strapped for cash, it is imperative that you seek out all of your options. Do your research and find a company with a reputation for trustworthy lending. By making smart, conservative decisions and using the resources that you have available to you, payday loans could be a solution to a tricky situation.
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