Lax Payday Loan Regulations Could Hit Older Americans Especially Hard

The U.S. Consumer Financial Protection Bureau's proposal to rescind a regulation for payday lenders could be detrimental to seniors, reports MarketWatch . The rule requires lenders to determine if the borrower could afford loan payments and still cover basic living expenses. The high-cost, short-term payday loans are usually applied to payouts of no more than $500, to be paid at time of the borrower's next paycheck. They have an average yearly percentage rate of 391 percent and are available from lenders' storefronts or online, says the Center for Responsible Lending. "It puts them in harm's way and is keeping people trapped in an unaffordable cycle of debt that leaves them worse off than when they started," notes Diane Standaert at the Center for Responsible Lending. Seniors living on a fixed income with little savings are frequently the most common individuals at risk of needing payday loans. They often need them to cover medical bills or rent. But because they may be unable to pay them off from a following paycheck, Standaert said they wind up with higher overdraft fees, high interest, and possibly bankruptcy. Payday lenders concentrate on older populations, especially because they receive guaranteed income in the form of Social Security benefits. "Continuing to target legal and licensed state-regulated lenders through regulatory restrictions on their ability to offer short-term credit options will push consumers into dangerous, harmful alternatives," warned the Community Financial Services Association of America.