High interest loans have been a part of society for years as many borrowers simply can’t qualify for traditional bank loans. Countless efforts to reduce the prevalence of high-cost loans have failed over the years, and many simply argue that high-cost loans are a natural parts of life that we have to deal with. These days, however, high-cost loans and predatory collection practices are coming under renewed scrutiny now that larges swathes of the nation find themselves imperiled by rising debt levels.
Here’s why high-cost loans are coming under renewed scrutiny, and why it may be difficult for predatory lenders to get away with fraudulent agreements in the near-future.
Taxes, loans, and debt are on society’s mind
If there’s one simple reason that taxes, debt, loans and lending practices are coming under renewed consideration by society, it’s likely that we’re undergoing a large political campaign to determine our future leader. With the 2020 presidential election drawing closer by the day, many popular politicians are making their cases to the nation, which usually means talking about debt, taxes, and the financial security of the entire population. This almost always necessitates a conversation about subprime lending, as lackluster lending practices can imperil the nation’s economy and have historical led to such crises as the 2008 financial meltdown.
With the 2020 presidential candidates drawing headlines about their stances on debt, it’s only natural that high-cost loans are coming under renewed scrutiny across society. Whether this means steep interest rates for students trying to further their education or predatory loans offered by those looking to exploit others in desperate need of cash, there’s going to be ongoing societal discourse around lending until the 2020 presidential election is in our rearview mirror.
Companies arguing that you should get a same day loan to buy furniture from Wellington’s Fine Leather Furniture, will thus have to deal with a tighter regulatory environment in the future, especially if politicians with harsher policies towards lenders are empowered. How might future restrictions on high-cost loans take shape? By and large, they’ll follow in the footsteps of existing policies and resemble current protections like the Military Lending Act, which was enacted to ensure that servicemembers weren’t being preyed upon by lenders with little regard to their long-term financial wellbeing. Those involved in short-term loans are well-advised to review that act to understand its importance and the need for it in the first place, even though its protections aren’t expanded to everyone.
Federal lawmakers are coming
Politicians aren’t simply floating restrictions on predatory lending to win votes – they’re gaining serious traction behind some of their proposals, and federal lawmakers are beginning to seriously take aim at high-interest loans that could prove difficult to pay back. With tens of millions of Americans turning to high-cost loans that sometimes feature triple-digit interest rates, political representatives are waking up to the fact that lending reform is sorely needed in order to ensure long-term financial stability. If too many consumers find themselves ensnared in predatory loans, after all, the entire financial ecosystem can find itself embroiled in tragedy and ultimately even collapse as it did in 2008.
With federal lawmakers now taking aim at ending the ceaseless debt cycle that many Americans find themselves trapped by, predator lenders are beginning to hedge their bets. Still, political progress is immensely slow and it’s quite unlikely that new legislation will materialize and be enacted given ongoing political polarization. With neither of the two major parties willing to hand the other a legislative victory, laws prohibiting high-interest loans could thus be delayed for months or even years. Predatory lending is as old as moneylending itself, but that doesn’t mean it will always be around. Despite obstacles in the path to success, politicians and citizens everywhere are beginning to unite around an agenda that fights back against high-interest loans.