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Consumer credit sources pulled off a narrow escape Wednesday as the Senate rejected an amendment to the financial reform package that would have tightened regulation on payday loan companies. The legislation was going to exert federal restrictions on an industry regulated at the state level. Provisions in the payday loan amendment would have limited consumer access to same day cash loans and prohibited cash companies from offering additional products and services.

Resource for this article: Senate rejects payday loan amendment in financial reform bill

Financial reform bill debate

The Senate financial reform package includes a new consumer protection agency with a very broadly defined authority that has aroused many concerns all across the financial industry, from giant Wall Street banks to car dealers who help customers with loan applications. The Wall Street Journal reports that the payday loan amendment in the financial reform bill, introduced last month by Democratic senator Kay Hagan of North Carolina, would have stopped payday loan companies from selling or providing any other services or products in the same location they give payday loans at. It would have also limited consumers to only receive six paycheck loans a year. The Federal Reserve Board would take control of the cash industry.

Timely credit offered by payday loans

Payday lenders offer advances on paychecks for those who may need short-term help for such things as unexpected car repair, emergency room charges or the opportunity to take advantage of a special offer. Payment happens after receiving the borrower’s next paycheck. The Chicago Tribune reports that cheaper methods for covering expenses when cash is short aren't as convenient or readily available — including credit cards — and are a lot tougher to get now, especially after the financial meltdown.

Payday lenders and the gap bridged

Payday lenders are actually doing very well right now since they help consumers when banks don’t give them any choice. The Tribune article explains that a recent government report found that 9 million U.S. households don't even have a checking or savings account, and millions more don't use them regularly. Even though payday lenders have escaped federal restrictions for now, the industry is regulated by states with a hodgepodge of rules and outright bans.

Amendment on payday loans dismissed

Senate debate on the financial reform package has gone on for weeks. When she tried to put her amendment for debate Tuesday afternoon, Senator Hagan needed unanimous consent for discussion. She failed, which leaves the payday loan amendment out of the financial reform bill for now. The stock market made a comment about the senate’s rejection on Wednesday. Cash America International Inc. was up by 4.1 percent leading it to $ 36.82, Ezcorp Inc. rose 3.4 percent to $ 18.76, Advance American Cash Advance Centers Inc. climbed 6.8 percent to $ 4.72 and First Cash Financial Services Inc. was up 2.3 percent to $ 21.86.

Citations

Wall Street Journal reports

http://online.wsj.com/article/BT-CO-20100519-712661.html?mod=WSJ_latestheadlines

Chicago Tribune reports

http://newsblogs.chicagotribune.com/burns-on-business/2010/05/lawmakers-target-payday-loans.html

Tags: financial reform bill, financial reform package, payday loan amendment, same day cash advances