AboutPaydayLoan.com reports that the negotiations about enacting a new financial protection bill are being held in Washington D.C. now. This bill is aimed at improving economic situation in the country after the subprime mortgage crisis and at protecting America against another financial crisis. These purposes are stated by Chris Dodd from Connecticut and other Senators, who are trying to introduce the reform and impose restrictions on operations of some industries.
Senator Dodd is sure that the new bill will prevent a possible economic recession and will enable consumers to get rid of unfavorable terms and difficult financial language, which credit companies use when they offer short-terms loans to the borrowers. If Mr. Dodd’s statements will be supported by other Senators, he intends to establish a new institution, the Consumer Financial Protection Agency (CFPA), which will impose additional financial regulations over the lending industry. It is going to be an autonomous government bureau with great power and authorities to oversee financial products, used by customers, including loans for cars and in-house credit services, offered in furniture stores. Other Senators propose CFPA to be controlled by the Treasury. Otherwise, if acting as a stand-alone agency, CFPA will have boundless power and can regulate the whole financial sector, and nobody will manage to restrain it.
Even though the majority of Senators consider that the new regulation is the only possible way to escape another crisis, a lot of financial experts don’t agree and think that the financial reform is likely to negatively affect the national economy rather than improve the situation in the long-term prospect. The most obvious drawback of the reform is the increase of unemployed people due to job losses. A lot of small businesses, including sellers of used cars or dentist offices provide their clients with in-house credit options. “In-house” means that a customer can get a short-term loan from a lender not going out of the office or the store of the seller. But if these businesses face regulations, they won’t be able to adapt to the changes and will have to leave the market.
The regulation will affect even reputable and secure direct payday lending companies like Paydayloanjr.com, which offer short-term credit. Many financial analysts believe that the ban of short-term loans (paycheck advance loans) will in fact worsen the economic situation in America. It can be proven by the reports, issued by the states, which have already prohibited payday lending operations at the local level.
A lot of small businesses have already stated that they are going to stop offering credit options to customers. They don’t want to be subjected to the strict legal rules just to work in accordance with the new laws and continue conducting currently unprofitable operations. By banning payday lending, which enables families with low income to make purchases and thereby increases sales, most economists forecast a great reduction of working places in the industries, affected by legislation. The majority of these industries didn’t have any attitude to the beginning of the economic collapse, but still have to cope with possible restrictions. What is definitely clear is that customer demand for short-term loans will not decrease in any case.