July 3, 2010

Cash Advance and the Proposed CFPA Bill


With numerous payment options and loan options readily offered by various lending institutions such as Advance America, Cash Advance and or Ezcorp, just to name a few, it may appear that a financially struggling individual has reliable alternative for his financial hardships. However, an entity called the Consumer Financial Agency also called as CFPA proposed a bill legislation which puts a thirty six interest rate cap on loan options and also restricts some of these beneficial loan alternatives. Because of such regulations, lending institutions' revenue are greatly affected, getting them to earn less than they can potentially earn and this is bad because their existence depends on the amount that they acquire from these interests. Furthermore, not only are they greatly affected but the potential applicant as well since these lending institutions will be forced to increase their percentage to cope up with this increasing business costs restrictions.

Though these cash advances have been modified for each state as of recent, and have implemented these rules, they do not cover everything. Because of this, lending institutions are still able to go around these regulations and are able to continue their operations. So far, these loopholes are yet to be closed but not anytime soon. Furthermore, applicants face the problem of being limited of only getting six instances of loan in a given year. This is a significant drawback because sixty percent of cash advance applications are given to applicants who utilize such options at least in an average of twelve times a year. In addition to this, CFPA also reveals their intent to regulate transactions which can cause more potential damage to the lending industry.


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