Alternatives to Payday Loan Products

Small Dollar Lender Market

The rise of the online lending industry has resulted in an inundation of consumer applicants and the need for online financial sector regulations. With each passing year, the U.S. governing bodies bring forward new laws and the changing of old laws. For 2016, an independent agency that regulates consumer financial product providers announced a proposal for a new rule that directly affects the small dollar lender market, specifically payday lenders. The purpose of this proposal is to phase out all financial services including payday loan and deposit advance products that target borrowers who demonstrate the inability to repay. In response, short term lenders are abandoning payday loan products and pushing alternatives to payday loans. The small dollar loan providers know that consumer demand will remain, so altering their services keeps them in business. Although small dollar lenders may not collect as much money from each customer as before, the online consumer will profit from this new groundwork that will curb bad lending practices, satisfy consumer needs, and offer a clearer approach for enhancing consumer financial health.

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