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Wednesday, October 9, 2013

What is the government doing to protect loan borrowers?

Federal banking regulations protect consumers from risky lending practices
Federal regulations protect loan borrowers from usury
By Edwin Taivonen 

Getting a loan is a personal matter, but that does not mean that you're left on your own. The U.S. government has many laws and regulations in place to protect consumers against abusive lending practices. If you are worried about your rights as a loan borrower, the security described below should make you a little more confident the next time you get a loan.

Mortgage protection

In January, 2013, the Consumer Financial Protection Bureau announced a new regulation for mortgage loans called the "Ability to Repay Rule." This legislation prevents lenders from issuing mortgage loans without ensuring that buyers can afford to pay them. CFPB Director Richard Cordray said, "Our Ability-to-Repay rule protects borrowers from the kinds of risky lending practices that resulted in so many families losing their homes. This common-sense rule ensures responsible borrowers get responsible loans." If you can't afford a loan you want to get, a bank will point you to something more budget-friendly.

Payday loan protection

Each state has its own rules with regards to payday loans. This determines how much money a lender can give out at a certain time, and how long a consumer has to pay his loan back. For example, a lender in South Carolina may issue a loan up to $550 with the payback period not to exceed 31 days. The lender may not charge more than 15% of the check in fees.

There are only 11 states that do not have any payday lending statutory provisions. Five states prohibit the use of payday loans entirely. You can learn more on the National Conference of State Legislatures website.

Student loan protection

Federal student loans are heavily regulated by the government, and they must be paid back under strict guidelines. With that said, there are some student loan laws that are designed to work in your favor. For instance, the federal government offers students a chance to defer their loan payments until after they start their careers. It also allows for dismissal of the loans under extremely rare circumstances, such as a severe disability or death. Most student loans are eligible for consolidation, and they can be paid back in proportion to a student's income. The government will not ask for more than you can afford.

Credit card protection

The Card Accountability, Responsibility, and Disclosure Act of 2009 (better known as the CARD Act) has had a major impact on the way consumers use and learn about their credit cards. Under this ruling, credit card companies are required to notify you of an interest change at least 45 days before it occurs. They must also provide you with a payoff period on your billing statements so you can clearly see how long it will take you to pay off your credit card balance. You might be surprised to see this information in black and white. 

Since the CARD Act went into effect in February 2010, consumers have reported a massive savings in fees and interest payments. The CARD Act Report of 2013 says consumers saved over $4 billion in 2012 alone as a result of the new rules. This is just another example of the government helping borrowers succeed.

Car loan protection

The Truth in Lending Act ensures that you are informed throughout the process of buying a car. A lender must provide information about your APR, monthly payment, and due dates associated with the loan before you sign off on a car. All of this must be presented in writing, and it cannot be changed without a new loan agreement. The Consumer Leasing Act works in a similar manner, but it is for people leasing a car rather than buying it outright.

As you can see, there is a multitude of laws in place that protect loan borrowers against debt-driven practices. While there are still plenty of shady lenders out there just looking to steal your money, the good ones are regulated by the federal government. Make sure your lender is someone you can trust, and you will have no problems with your loan. 

About the Author:  Edwin Taivonen is a staff writer for http://localcashguide.com/ , a website where consumers can learn more about the USA payday lending industry and choose the right lender or a reliable alternative solution. Follow him on Googleplus and Twitter

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