The Consumer Financial Protection Bureau (CFPB) has been proposing some new rules that may very well destroy the industry for lending companies that provide fast cash online. These lending companies, also known as payday lenders, allow their customers to get fast cash online and to pay the loan back (with loan fees included) in about two weeks. The new rules that will likely cause big problems for payday lenders, however, do not apply to pawn brokers.
The CFPB has intentionally made the choice to allow exclusions for pawnshops from the proposed new rules. The bureau seems to believe that pawnshops offer better outcomes than the companies that offer fast cash online or via local lending locations.
Payday lending companies believe that the exclusion of pawnshops from the new rules is another case of the government showing preference for that industry over theirs. As to whether or not pawnshops have anything to gain in this scenario remains to be seen. Critics of the companies that offer fast cash online via payday loans think that households that are desperate for quick cash would be better off going to pawnshops than they would be by taking out a payday loan.
The logic behind this thinking is that pawning an item for cash doesn’t have the same implications and challenges that can be part of taking out fast cash online via a payday lender. The CFPB believes that when people take out fast cash online from payday lenders that the borrower will end up in a “cycle” or “trap” of debt. It is true that some people get fast cash online and then have to roll their loan over into an additional loan. Some borrowers repeat this process several times and wind up having difficulty paying off their payday loans.
The CFPB believes that pawning an item does not present consumers with this perceived “debt trap” scenario. If someone cannot repay a loan via a pawn broker, the broker will simply retain ownership of the item that was pawned and that is the end of the story. The CFPB also believes that people would be “more likely to understand and appreciate the risks associated with physically turning over an item to the lender when they are required to do so at consummation.”
Borrowers Deserve the Option to get Fast Cash Online
The pawn shop industry has been around for a long time. There are even references to pawning an item in the Old Testament of the Bible. However, the companies that run fast cash online websites and local payday lending locations believe that pawnshops are getting a very unfair advantage by being excluded from the proposed CFPB rules.
According to Jamie Fulmer from Advance America, “Our customers decide based on their personal circumstances and preferences whether to borrow $200 from us or to pawn their belongings; they don’t need the government to make that decision for them. The CFPB is trying to choose winners and losers, and worse, they’re trying to do so without ever bothering to talk to real consumers in order to understand their preferences or rationale.”
Whether someone prefers to get fast cash online from a payday lender or they prefer to visit a local pawnshop to make fast cash should ultimately be a personal decision. The government should not be stepping all over the lenders that allow people to get fast cash online, while turning a blind eye toward the pawnshop industry. It isn’t fair to business owners or borrowers.