Friday, April 28, 2006
Tweet[IWS] CRS: Payday Loans: Federal Regulatory Initiatives [online 21 April 2006]
IWS Documented News Service
_______________________________
Institute for Workplace Studies Professor Samuel B. Bacharach
School of Industrial & Labor Relations Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor Stuart Basefsky
New York, NY 10016 Director, IWS News Bureau
________________________________________________________________________
Congressional Research Service (CRS)
Order Code RS21728
Updated May 23, 2005
Payday Loans: Federal Regulatory Initiatives
Pauline Smale, Economic Analyst, Government and Finance Division
http://opencrs.cdt.org/rpts/RS21728_20050523.pdf
[full-text, 6 pages]
Summary
A payday loan arrangement permits an individual to use a personal check to get a
small, short-term, cash advance. The loans are typically for $100-$500. The borrower
writes a postdated check for the loan amount and a fee. The lender holds the check until
the borrower's next payday, usually two weeks. This source of short-term credit can be
expensive. The fee charged on a 14-day payday loan is typically $15 to $17 per $100
advanced, amounts equivalent to an APR (annual percentage rate) of between 391% and
443%. A loan can become even more expensive if it is rolled over or extended.
State laws have generally governed payday lending; some are silent while others
have prohibited or restricted payday lenders. Payday loans are subject to the disclosure
provisions of the federal Truth-In-Lending Act. When payday lenders attempted to
partner with banks and thrifts to circumvent restrictive state laws, however, federal
regulators issued supervisory guidance relating to payday loans. Depository institutions
were cautioned that these arrangements introduced financial, compliance, and reputation
risks. Consumer advocates are concerned that these guidelines may not provide
sufficient consumer protection. They have called on Congress to examine the activities
of payday lenders to see if reforms are needed to protect consumers. Legislation, H.R.
1643 and H.R. 1660, that would regulate the payday lending has been introduced. This
report provides information on the practice of payday lending and an overview of federal
regulation and legislation. This report will be updated as events and legislation warrant.
_____________________________
This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.
Stuart Basefsky *
Director, IWS News Bureau *
Institute for Workplace Studies *
Cornell/ILR School *
16 E. 34th Street, 4th Floor *
New York, NY 10016 *
*
Telephone: (607) 255-2703 *
Fax: (607) 255-9641 *
E-mail: smb6@cornell.edu *
****************************************
_______________________________
Institute for Workplace Studies
School of Industrial & Labor Relations
Cornell University
16 East 34th Street, 4th floor
New York, NY 10016
________________________________________________________________________
Congressional Research Service (CRS)
Order Code RS21728
Updated May 23, 2005
Payday Loans: Federal Regulatory Initiatives
Pauline Smale, Economic Analyst, Government and Finance Division
http://opencrs.cdt.org/rpts/RS21728_20050523.pdf
[full-text, 6 pages]
Summary
A payday loan arrangement permits an individual to use a personal check to get a
small, short-term, cash advance. The loans are typically for $100-$500. The borrower
writes a postdated check for the loan amount and a fee. The lender holds the check until
the borrower's next payday, usually two weeks. This source of short-term credit can be
expensive. The fee charged on a 14-day payday loan is typically $15 to $17 per $100
advanced, amounts equivalent to an APR (annual percentage rate) of between 391% and
443%. A loan can become even more expensive if it is rolled over or extended.
State laws have generally governed payday lending; some are silent while others
have prohibited or restricted payday lenders. Payday loans are subject to the disclosure
provisions of the federal Truth-In-Lending Act. When payday lenders attempted to
partner with banks and thrifts to circumvent restrictive state laws, however, federal
regulators issued supervisory guidance relating to payday loans. Depository institutions
were cautioned that these arrangements introduced financial, compliance, and reputation
risks. Consumer advocates are concerned that these guidelines may not provide
sufficient consumer protection. They have called on Congress to examine the activities
of payday lenders to see if reforms are needed to protect consumers. Legislation, H.R.
1643 and H.R. 1660, that would regulate the payday lending has been introduced. This
report provides information on the practice of payday lending and an overview of federal
regulation and legislation. This report will be updated as events and legislation warrant.
_____________________________
This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.
Stuart Basefsky
Director, IWS News Bureau
Institute for Workplace Studies
Cornell/ILR School
16 E. 34th Street, 4th Floor
New York, NY 10016
Telephone: (607) 255-2703
Fax: (607) 255-9641
E-mail: smb6@cornell.edu
****************************************
# posted by SBasefsky : 2:27 PM
