A narrow escape was pulled off as senate rejected an amendment to the financial reform package that would have tightened regulation on payday loan companies Wednesday. The proposed legislation sought to exert federal restrictions on an industry regulated at the state level. Provisions in the payday loan amendment would have limited consumer access to same day cash loans and prohibited cash companies from offering additional products and services.
Source for this article: Senate rejects payday loan amendment in financial reform bill
Financial reform bill and the debate
The Senate financial reform package has a new consumer protection agency with defined authority that has aroused concern across the financial industry, from giant Wall Street banks to car dealers who help customers with loan applications. The Wall Street Journal reports that the payday loan amendment in the financial reform bill, introduced last month by Democratic senator Kay Hagan of North Carolina, would have stopped payday loan companies from selling or providing any other services or products in the same location they give payday loans at. It would have also limited consumers to only be able to get six paycheck loans a year. The Federal Reserve Board would take control of the cash industry.
Payday loans offer timely credit
Payday lenders offer advances on paychecks for those who may need short-term help for such things as unexpected car repair, emergency room charges or the opportunity to take advantage of a special offer. Payment happens after receiving the borrower’s next paycheck. The Chicago Tribune reports that cheaper methods for covering expenses when cash is short aren’t as convenient or readily available — including credit cards — and are a lot tougher to get now, especially after the financial meltdown.
The gap bridged by payday lenders
Payday lenders are doing well these days because they’re satisfying a consumer need while conventional banks leave many consumers high and dry with no other alternatives. The Tribune article explains that a recent government report found that 9 million U.S. households don’t even have a checking or savings account, and millions more don’t use them regularly. Even though payday borrowers and lenders have escaped federal restrictions for now, the industry is regulated by states with a hodgepodge of rules and outright bans.
Dismissed is the payday loan amendment
Senate has been debating on the financial reform package for weeks. When Senator Hagan tried to put up her amendment for debate Tuesday afternoon she needed unanimous consent for a discussion. She failed, which leaves the payday loan amendment out of the financial reform bill for now. On Wednesday, the stock market responded to the Senate’s rejection. Cash America International Inc. was up by 4.1 percent leading it to $ 36.82, Ezcorp Inc. rose 3.4 percent to $ 18.76, Advance American Cash Advance Centers Inc. climbed 6.8 percent to $ 4.72 and First Cash Financial Services Inc. was up 2.3 percent to $ 21.86.
Additional information at these websites
Wall Street Journal reports
http://online.wsj.com/article/BT-CO-20100519-712661.html?mod=WSJ_latestheadlines
Chicago Tribune reports
http://newsblogs.chicagotribune.com/burns-on-business/2010/05/lawmakers-target-payday-loans.html
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