The Consumer Financial Protection Bureau has been promising for a while to deal with predatory payday loans. They’ve now started their response, with a proposal to be followed up next year by a final ruling and regulations to go with it.

I’m opposed to regulation in general and favor a free market approach, but that only works when the market is truly free. In this instance, the market is full of deception — and there’s nothing wrong with saying deception won’t be tolerated.

Payday loans catch people when they have little choice. To combat extortion when people are desperate, the federal government could regulate this niche market out of business, allowing for another market for large, institutional lenders or other organizations with better policies.

In other words, if there’s a need in the market, the market should be allowed to provide a solution that doesn’t take advantage and ruin people like the current option does.

For example, as federal employees, military personnel are in a special classification and have options for obtaining loans and credit. When I served in the Marines I had to borrow $1000 – a lot back then – from Navy Federal Credit Union to buy uniforms. Marine Corps personnel officers directed us to the credit union and showed us how to do it. I had a payroll deduction to pay it back in a year. 

But these predatory lenders locate around bases on purpose and prey on our servicemen and women, hoping no one points people in the right direction like they did for me.

There is nothing wrong with making sure the public is aware of the better option, so they can make a wise choice. In fact, it’s desperately needed.

As a Memphis bankruptcy law firm, we get a lot of business from payday lenders, because when people take the loans they’re already in bad shape. They have no ability to repay the loans and their situation gets worse and worse. It’s a terrible pattern.

If you have payday loan debt, contact us today. The conversation is free.