To lessen the high interest rates of short-term loans that put consumers in a debt cycle, Federal regulators said recently they are going to impose gaps between loans.
New guidelines will be issued to banks today by Federal Deposit Insurance Corp. and the office of the Comptroller of the Currency similar to early payday lending rules. In a study done by CFPB, they are also considering instigating a mandatory gap in between loans. According to the new rules, banks will now measure the borrowers’ ability to repay the loan, disclose an annual percentage rate for the loan, and wait a billing cycle to ensure the consumer will pay off old loans before getting a new one.
CFPB Director Richard Cordray said consumers are at risk in using short-term loans because it can cause long-term debts.
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