Report: Payday Loans Can Create Long-Term Indebtedness

By Vicki Needham

The nation’s top consumer protection agency says payday loans create a cycle of indebtedness for many consumers.

In a broad-ranging report released on Wednesday, the Consumer Financial Protection Bureau (CFPB) found that payday and deposit advance loans with their loose lending standards, high costs and risky loan structures can trap people in debt.

“This comprehensive study shows that payday and deposit advance loans put many consumers at risk of turning what is supposed to be a short-term, emergency loan into a long-term, expensive debt burden,” said CFPB Director Richard Cordray.

“For too many consumers, payday and deposit advance loans are debt traps that cause them to be living their lives off money borrowed at huge interest rates.”

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