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Debt relief: agency warns against payday loans

A federal agency, the Consumer Financial Protection Bureau, may soon be working to change some of the fees and time constraints associated with so-called pay advance loans. After being deluged with complaints from consumers regarding these types of loans, the agency believes that new guidelines may be needed in order to prevent people from being bogged down with relentless debt. In the meantime, residents of Washington who may be searching for debt relief could possibly benefit from the information that has been published about this particular loan product.

The agency has stated that the type of lending that these businesses currently engage in are anticipating that clients will be unable to pay off their note within the 14-day requirement. This inability to meet the written stipulations results in the loan being renewed, often many times. The increased cost of the loan, combined with the high rate of interest, often works to enslave the debtor in an endless cycle of payments.

Many people who resort to these types of loans are struggling to make ends meet. The ability to obtain a small loan without having to endure credit reviews may seem to be the ideal solution for individuals who need money on short notice. Many times, however, the consumer winds up paying several times the value of the original amount due to the high costs of the loan and the short mature date of the contract.

This agency has received input on other consumer advocacy groups that are calling for reforms to this particular industry. The companies themselves are in agreement on some changes in the way they conduct business. However, the business representatives also stated that they do provide a useful service to many consumers.

Not every creditor that lends money engages in possible predatory contracts, conversely, there are less scrupulous lenders who may attempt to lure consumers into more debt than they can handle. Residents of Washington who may be struggling under seemingly relentless bills do have debt relief options available, including filing for bankruptcy. There are resources and professionals in place that can provide information that may be able to bring some financial stability back into the lives of those who may be feeling hopeless.

Source: cnbc.com, "Payday loans trap consumers in 'spider webs of debt'", Herb Weisbaum, March 26, 2014

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