I have written here before that pay day and car title loans, along with loans from outfits like Western Sky Financial, are a really bad idea. They are a short term solution at best, and a recipe for disaster at worst. However, Congress, through a bill in the House, is trying to give these lenders legitimacy without providing needed protection for consumers.
The bill, H.R. 3139, otherwise known as the Consumer Credit Access, Innovation and Modernization Act, would give non-bank financial services providers such as these access to a federal charter issued by the Office of the Comptroller of the Currency. Attorneys general from 41 states, however, have signed a letter to Congressional leaders, stating their stiff opposition to this bill.
They say that the bill would totally preempt state licensing laws for non-bank financial services providers, and require state consumer protection laws to be evaluated under the federal preemption standard. They go on to say that the bill "would provide no significant protections for consumers and have unintended consequences."
It is one thing to try to update banking laws for the modern age. It is another to do so without making sure that the consumer protection provisions are upgraded as well. In place of state safeguards, the officials say the bill would establish only minimal consumer protections.
Although the bill would prohibit lenders from extending credit to consumers unless there is a reasonable basis for believing the consumer can repay the loan, they say it establishes no standards for determining a consumer’s ability to repay.
Since Congress is apparently not looking out for you, you will need to look after yourself. Before getting one of these loans, take a close look at your financial situation. Is it a short term or a long term problem? If it is the latter, perhaps you should be looking at bankruptcy to get a financial fresh start and, hopefully, get rid of the need for loans such as this.
If you live in southern New Jersey and are thinking about bankruptcy, please call my office at 856-432-4113 or contact me through this site to schedule an appointment to discuss your options, and whether bankruptcy is right for you. If you are looking for further information, please download my free book, Top Questions People Ask About Filing Bankruptcy in New Jersey.
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