This describes Kansas City payday loans and the desire for consumers to have access to small dollar consumer loans.
Over the last year, the Consumer Financial Protection Bureau (CFPB) has collected more than one million comments submitted to the agency ahead of its proposed small-dollar lending rule that would regulate Kansas City payday loans and other small consumer loans. Despite evidence that consumers want and need access to small-dollar loans, the head of the CFPB – Richard Cordray – testified before the House Financial Services Committee that the agency will double down on its plans. He made no acknowledgement of the negative impact of banning payday loans.
In his testimony, Cordray pointed out that 14 states currently ban payday loans and these consumers “seem to get by just fine,” but the truth is there is no such thing as a state with no payday loans. An estimated 11,600 consumers in these 14 states go online seeking a payday loan every day with about 2.7 million payday loan applications submitted from these states per quarter.
Consumers Seek Banned Payday Loans
Typically, consumers in states banning payday loans turn to lenders illegally marketing loans and in some cases lenders based offshore. The proposed rule to limit access to legal payday loans would have no effect on these loans and do nothing to protect borrowers.
About one-third of all payday loan complaints come from 14 states that ban payday loans. This means that consumers in these states are seeking loans from unregulated and largely illegal lenders instead of working with local, regulated and licensed businesses.
The CFPB, which was created in 2011 in response to the financial crisis and recession. In that time it has only received 17,207 complaints about payday loans. Meanwhile, about 550 million payday loan transactions have occurred since 2011. This means the CFPB receives on average just one complaint for every 32,000 payday loans.
Even though there are states that do not allow regulated payday loans, it is clear that consumers find other ways to access small-dollar loans.
Consumers without access to this lending industry make more complaints about illegal debt collection and lenders, bounce more checks, and file for bankruptcy more often.
When used responsibly, Kansas City payday loan providers like Waldo Financial give consumers access to credit they may not have otherwise have access to. This helps them avoid serious financial repercussions like bad credit, disconnected utilities, foreclosure, repossession, bankruptcy, and bank fees.