As part of credit consumer protection, local and national governments enforce rules to regulate short-term, bad credit loan providers. These types of loans are particularly attractive to those who are in dire need of cash, those who have exceeded their borrowing limits on their credit cards, and even those who need cash to cover mortgage and rental costs. These loans have also become the best option to those who have poor credit standing and who have been disqualified from bank loan applications.
However, amidst the growing popularity and huge benefits of bad credit loans, the industry has been faced with a number of concerns and issues. One is the fact that these loans have high interest rates and that some providers tend to overcharge credit consumers. Also, with these loans, vulnerable credit consumers can easily get trapped in a debt spiral. Because they cannot pay the loan at the agreed date, they incur penalty charges. Sometimes, if borrowers are unable to pay the full amount, they choose to roll the loan over, adding to their already huge debt. There have also been spreading rumors and concerns about some bad credit loan providers pushing loans to consumers, especially desperate and vulnerable ones, as well as consumers who cannot really afford to pay the loan back.
In response to these issues, local and national governments mandate a number of rules and regulations to bad credit loan providers. One is the implementation of the Truth in Lending Act, a directive that requires them to divulge all types of information that credit consumers need to know, including interest rates, penalty charges, rollover fees, and other hidden fees that consumers have the right to know. The House has also passed a financial system reform bill aimed to protect credit consumers from abusive financial service practices. The bill also included measures such as placing cap on payday loan charges.
Meanwhile, the Fair Debt Collection Practices mandate proper and professional collection of debt. Abusive and harassing calls are common scenario especially during collection of overdue loans. This law ensures that credit consumers are treated fairly and nicely during financial difficulties.
Aside from these national laws, every state also has its own rules and regulations when it comes to short-term, bad credit loans. Each state has its own maximum rate of interest, as well as maximum payment for overdue loans.
The industry of short-term, bad credit loans may indeed have been faced with a number of issues, including being criticized as predatory, but it has definitely proven itself beneficial to a lot of people, helping them get easily out of financial difficulties. Statistics have also revealed that short-term, bad credit loan consumers don’t just use the loan money during emergency needs like payment for car repair or medical services, but they’ve also been used to cover mortgage and rental costs, as well as basic needs at home. Also, credit consumers like speedy, easy, and convenient transactions – things that only short-term, bad credit loans can provide. These, in fact, are the reasons why these loans continue to be attractive despite all the critical and negative beliefs about the industry.