Current Events in October 2017

Browse Current Events by year

2017

Browse Current Events by month

Get trending consumer news and recalls

    By entering your email, you agree to sign up for consumer news, tips and giveaways from ConsumerAffairs. Unsubscribe at any time.

    Thanks for subscribing.

    You have successfully subscribed to our newsletter! Enjoy reading our tips and recommendations.

    Payday lenders now face tougher requirements

    Lenders must make sure the borrower has the means to repay the loan

    The Consumer Financial Protection Bureau (CFPB) has finalized a rule requiring lenders to determine whether a borrower has the means to repay the loan.

    Currently, payday loan borrowers can secure a loan without financial documentation; usually in the amount of $200 to $500. Since the loans are due in two weeks, borrowers often take out another loan to repay the first one.

    The CFPB aims to put a stop to this by preventing borrowers from ending up with a series of loans (each with steep fees) to refinance the same debt.

    The new rule not only covers payday loans, but similar products like auto title loans, deposit advance products, and longer-term loans with balloon payments. 

    Small dollar lenders will also face new restriction on their ability to make repeated attempts to debit payments from a borrower’s bank account, resulting in mounting fees and even account closure.

    'Trapped in loans'

    “Too often, borrowers who need quick cash end up trapped in loans they can’t afford," said CFPB Director Richard Cordray. "The rule’s common sense ability-to-repay protections prevent lenders from succeeding by setting up borrowers to fail.”

    The Community Financial Services Association of America (CFSA), the trade group representing payday lenders, said the CFPB is out of touch and ignoring the wishes of consumers.

    “This federal small-dollar lending rule is a tremendous blow to the more than one million Americans who spoke out against it during last year’s comment period," said Dennis Shaul, the group's CEO. "Millions of American consumers use small-dollar loans to manage budget shortfalls or unexpected expenses.

    Praise from consumer advocates, however, is nearly universal. Michael Calhoun, president of the Center for Responsible Lending, says the new rule is a step toward preventing financial harm to families, who often turn to payday loans because they are struggling to make ends meet.

    "Today's rule release was years in the making, and it wouldn't have been possible without the tireless effort of community and faith leaders, consumer and civil rights advocates, and countless people across the country who organized and worked hard to make their voices heard.

    Payday loans normally carry what might seem modest -- $15 to $30 on a loan of around $100. But because the loan amount is small, and only for a two week period, the annual interest rate is extremely high, usually 400 percent or more.

    Before making a loan, small dollar lenders will now be required to determine whether the borrower can pay back the loan when it is due two weeks later. For longer-term loans with a balloon payment, full payment is defined as being able to afford the payments in the month with the highest total payments on the loan.

    Low-cost installment loans

    Nick Bourke, director of The Pew Charitable Trusts’ consumer finance project, says the new rule opens the door to lower-cost installment loans from banks and credit unions. But regulators, he says, still have work to do.

    “Bank and credit union regulators must now create the clear guidelines these lenders need in order to make small installment loans safely and profitably," Bourke said. "If they do, millions of consumers can save billions of dollars by gaining access to lower-cost credit."

    Despite the celebration among consumer groups, there is some concern that the Payday Lending Rule may be short-lived.

    A coalition of consumer groups, called Stop the Debt Trap, warned that some in Congress may attempt to repeal the rule. The group says it will fund an advertising campaign to mobilize consumers to oppose any Congressional roll-back.

    The Consumer Financial Protection Bureau (CFPB) has finalized a rule requiring lenders to determine whether a borrower has the means to repay the loan....

    Get trending consumer news and recalls

      By entering your email, you agree to sign up for consumer news, tips and giveaways from ConsumerAffairs. Unsubscribe at any time.

      Thanks for subscribing.

      You have successfully subscribed to our newsletter! Enjoy reading our tips and recommendations.

      Equifax provides few details on its credit-freezing tool

      Consumers will be able to freeze and unfreeze credit without paying fees

      Equifax says consumers concerned about the company's massive data breach will be able to freeze and unfreeze their credit at will and not pay a fee.

      In his testimony before a House subcommittee Tuesday, former Equifax CEO Richard Smith listed the new tool among other free remediation tools the company is providing to consumers to help them protect their identity, but he did not elaborate on it.

      A credit freeze prevents anyone from accessing a consumer's credit report, so an identity thief who has stolen the victim's Social Security number and other identifying information would be unable to open a fraudulent credit account because the lender would be unable to pull the credit file.

      The credit file could only be unfrozen with the consumer's permission, making the credit freeze among the strongest identity theft prevention measures that can be taken. Normally, the consumer pays a fee to freeze the credit file and another fee when it is unfrozen.

      Equifax has disclosed few details of the tool, other than to say it hopes to have it available by the end of January. In an email to ConsumerAffairs, a company spokespereson said additional details would be provided closer to the launch date.

      Different opinions

      Security and identity theft experts have different opinions about whether a simple, easy-to-use tool to freeze and unfreeze credit is a good idea. Some have backed the idea, saying that hackers will have a harder time stealing identities if more consumers are freezing their credit files.

      But Eva Valasquez, CEO of the Identity Theft Resource Center (ITRC), thinks the process should not be so simple and quick that it becomes vulnerable to hacks.

      "I hope that the solution that industry proposes is not more automated technology," Valasquez told ConsumerAffairs in an interview last month. "Because the process of establishing who you are goes through several steps, and we should appreciate that it's going to take a little longer."

      Whatever form the freeze tool takes, it won't be a complete solution. That's because it will only freeze one credit file -- the one managed by Equifax. Consumers also have credit files with the two other credit bureaus, Experian and TransUnion.

      There will still be fees to freeze and unfreeze those files. Valasquez says ITRC has launched an online petition urging Experian and TransUnion to also waive fees when consumers freeze and unfreeze their credit reports.

      Equifax says consumers concerned about the company's massive data breach will be able to freeze and unfreeze their credit at will and not pay a fee.In...

      Halloween spending projected to hit a record high this year

      Nearly 180 million consumers plan to get in on the fun

      An annual survey by the National Retail Federation shows that consumers will spend a record $9.1 billion on Halloween this year, up 8.3 percent from last year.

      Consumers will spend an average of $86.13 on costumes, candy, and other holiday staples -- up 20 cents from last year -- and 179 million are expected to partake in Halloween festivities, up 8 million from 2016.

      Only 12.9 percent say the economy will affect their spending, compared with 14.1 percent last year and a peak of 32.1 percent in 2011.

      How they'll spend

      According to the survey, 69 percent of Halloween shoppers say they'll buy costumes ($3.4 billion), 95 percent will buy candy ($2.7 billion), 72 percent will buy decorations ($2.7 billion), and 37 percent will buy a card ($410 million).

      Overall, the researchers say 71 percent of Halloween celebrants plan to hand out candy, 49 percent will decorate their home or yard, and 48 percent will wear a costume.

      Additionally, 46 percent plan to carve a pumpkin, 35 percent will throw or go to a party, 31 percent will take their kids trick-or-treating, 23 percent will visit a haunted house, and 16 percent will dress their pets in costumes.

      Where they'll shop

      Discount stores are still king when it comes to buying costumes and other Halloween supplies, with 47 percent of shoppers saying they''ll go there.

      Another 38 percent say they'll patronize a specialty Halloween store or costume store, 25 percent will shop at supermarkets, 24 percent will buy at department stores, and 22 percent will do their business online.

      An annual survey by the National Retail Federation shows that consumers will spend a record $9.1 billion on Halloween this year, up 8.3 percent from last y...