Groups issue report promoting availability of reasonably priced short-term credit options
Consumer advocates at Consumer Federation of America (CFA) joined with Illinois-based Woodstock Institute to highlight a new report on alternatives to high-cost credit.
The report specifically examines options available to consumers in states that have capped interest rates on payday loans and other short-term, high-interest credit options.
“In states that have capped rates and protected their consumers from predatory lending, consumers employ a variety of strategies to grapple with the chronic gap between growing expenses and stagnating wages and wealth,” said Rachel Gittleman, CFA’s Financial Services Outreach Manager. “This report provides a helpful tool for legislators, advocates, and organizations working to identify safe, affordable alternatives to high-cost loans.”
“We are in the midst of an era where more products and more companies are responding to the need for quick, small-dollar loans,” said Horacio Mendez, President & CEO of Woodstock Institute. “Gone are the days where triple-digit interest rate loans were a consumer’s only option.”
The report notes that consumers in states with rate caps are turning to credit cards, charitable organizations, and friends and family to meet short-term financial needs. These methods are also being met with new lending alternatives.
Some banks are now offering short-term loan products to customers at relatively low rates. The report also points to employer-sponsored loans as an option for short-term credit needs.
The bottom line: Consumers are benefiting from interest rate caps on short-term loans. In fact, the caps are spawning new business opportunities that offer credit without the debt trap of triple digit interest rates.
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