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Business memo on Payday and auto title loan rule Name Institution Business Memo To: Top management From: Assistant supervisor Date: 29th January 2018 Subject: Payday and auto title loan rule This memo is about the proposed payday and auto title loan rule, the industries it affects and the actions imposed. Payday loans are typically small-dollar loans ranging between $300 to $500 payable in full within two or four weeks. The loans are expensive to low-income consumers since the payments include $15 charge for every $100 representing 15 percent. On the other hand, the auto title loans are also short-term loans payable in less than four weeks though the borrowers are required to produce the car title or the truck title as the collateral. Once implemented, risk lenders will be required by the proposed rule to determine the affordability of the borrowers and whether they have the capacity to pay in full amount without entering into debt traps. Also under the new proposed rule, the installment loans with interest rates exceeding 36% annually will be regulated so that lenders cannot make multiple withdrawal attempts to borrower’s checking (CFPB 2016). By proposing the new Payday and Auto Title Loan Rule, the Consumer Financial Protection Bureau targets small- dollar and short-term credit market within the payday loans industry. In what looks like a twist to their business, the payday and auto title lenders will have to take new steps in providing borrowers with covered loans (Kirsch, Mayer, & Silber 2014). They will be required to make a sound determination of the ability of the borrowers to pay loans before giving them out. The proposed rule will put
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