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Susan Tompor: Payday loans rule could lead to cheaper alternatives

Susan Tompor, Detroit Free Press on

Published in Home and Consumer News

Payday alternative loans cannot be rolled over into another loan. Loan amounts run between $200 and $1,000. The borrower must be a member of the credit union for at least one month. And the term of the loan can range from one month to six months.

How many new products we'll see, though, is unknown now.

The new rule for short-term, small-dollar credit is spelled out in more than 1,600 pages, so banks say it will take time to review what options exist. The Community Bankers Association has complained that the CFPB should have worked with other banking regulatory agencies to examine the use of small-dollar lending programs, such as deposit advance products, so consumers could receive short-term emergency loans from their banks.

Deposit advances are short-term loans that are similar to payday loans but typically banks and credit unions offer them only for their own customers.

Payday lenders aren't thrilled by these changes -- and we can expect pushback.

Before consumers take out payday loans, though, they can ask themselves whether they have a realistic chance for being able to quickly repay a high-cost loan. It's good to explore other options -- including asking family members for help or even pawning some goods -- long before any new payday lending rules might take place.

About The Writer

Susan Tompor is the personal finance columnist for the Detroit Free Press. She can be reached at stompor@freepress.com.

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