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The newly appointed Director of the Federal Reserves' Consumer Financial Protection Bureau, Richard Cordray kicked off a field hearing on payday lending in Birmingham, Ala., by explaining why he was there and what the Bureau wants to learn from consumers about payday loans.
Payday loans typically allow consumers to receive funds very quickly, but they can also present potential harm. For example, repayment is often due within two weeks at a hefty price. The annual percentage rate (APR) sometimes reaches more than 400 percent. A consumer who can't pay on time may take on more debt to cover the previous loan that has now come due. Paydays loans may give consumers quick and easy access to cash, especially when they find themselves in a financial pinch. But these loans, with their high fees and requirement of immediate repayment out of the consumer's next paycheck, can send consumers into a cycle of debt. The CFPB wants to know how these small-dollar loans impact consumers.
Director Corday stated at the commencement "I want to be clear about one thing: We recognize the need for emergency credit. At the same time, it is important that these products actually help consumers, rather than harm them." He went on to say, "A lack of supervision at the federal level means there is a lot we do not know about some of the inherent risks associated with payday products. Through forums like this and through our supervision program, we will systematically gather data to get a complete picture of the payday market and its impact on consumers. This assessment will allow us to better choose among the tools we have available at the Consumer Bureau to balance the needs of consumers with the risks they face."
Watch Director Cordray's introduction to the hearing www.consumerfinance.gov/getting-a-complete-picture-of-the-payday-market/
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