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2 Payday Lending and State Regulation

2 Payday Lending and State Regulation

Payday lending is widespread. FDIC (2013) estimates that 4.7% of most U.S. households have actually at a while utilized payday lending, while Pew Charitable Trusts (2012) sets the figure at 5.5per cent of U.S. grownups. In 2005, payday storefronts outnumbered McDonald’s and Starbucks places combined (Graves and Peterson, 2008). Loan providers stretched $40 billion in payday credit this season, producing profits of $7.4 billion (Stephens Inc., 2011).

To date the authorities has perhaps not directly regulated payday lending (save via basic statutes including the Truth in Lending Act additionally the Military Lending Act), though this could alter given that the customer Financial Protection Bureau (CFPB) was offered rulemaking authority within the industry. Typically, payday financing legislation happens to be kept to your states. Before the mid-2000s, states‘ power to control payday financing had been undermined because of the so-called „rent-a-bank“ model, wherein a nearby loan provider would mate with a federally-chartered bank maybe perhaps not susceptible to that loan provider’s state guidelines, thus importing exemption from those laws and regulations (Mann and Hawkins, 2007; Stegman, 2007). Continue reading ‚2 Payday Lending and State Regulation‘

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