BRYAN, Tex. (KBTX) - Many have described payday loans as a debt trap that targets middle and low-income Texans.
But now there's an organization that's helping to keep folks from getting in even more over their head.
Some new rules put in place by the Consumer Financial Protection Bureau would prohibit lending unless it can be verified that the client can actually pay back that loan.
Matthew Choi, with our reporting partners at the Texas Tribune joined us on First News at Four to talk about these new regulations which should go into full effect by summer of 2019.
According to Choi's article, payday loans, which are already effectively banned in 15 states, involve customers taking small-quantity loans with very high fees. Clients are expected to pay back the fees and principal amount often by their next payday. Prohibitively high fees, however, often cause debts to roll over to the next month, which critics say causes a cycle of debt.
The new federal rules cover an expanse of lending practices advocates have called predatory -- firms must now verify a client's ability to pay back loans before issuing them and cannot pull money directly from a client's checking account without written notification first. The new rules also limit rollovers for overdue payments.
Read more on this story by visiting the original article from The Texas Tribune in the Related Links section.