[Payday Loans; an Investigation into the Requirement for Further Regulation]

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Acknowledgement

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DECLARATION

I, [type your full first names and surname here], declare that the contents of this dissertation/thesis represent my own unaided work, and that the dissertation/thesis has not previously been submitted for academic examination towards any qualification. Furthermore, it represents my own opinions and not necessarily those of the University.

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LITERATURE REVIEW5

The Industry of Payday Loan8

The Supply Side8

State and Federal Regulation12

Pawnbrokers: An Age Old Lender of Last Resort13

Payday Lenders: The Most Recent Addition to the Consumer Financial Landscape14

The Payday Lending Process15

Payday Lending Institutions Depend on Chronic Loan Flippers and the Cycle of Debt for Profits16

Positioning Fringe Finance17

Economically17

Morally20

Conclusion21

METHODOLOGY26

Qualitative Research26

Research Design28

Literature Search29

Limitation of the Study29

REFERENCES30

Payday Loans; an Investigation into the Requirement for Further Regulation

LITERATURE REVIEW

The Consumer Protection Act and Dodd-Frank Wall Street Reform was approved in the year 2010 in July, that started a new financial regulation era. The reforms have influence over all institutions in financial sector from pawnbrokers to big banks. There is no exception in Payday loans. There can be several changes to the landscape of regulation of the small-dollars, loan of short term period from the Consumer Financial Protection Bureau that unlocked its access in the year 2011, in July. Among all the types of loans, Payday loans are very expensive consumer's credit form that can be obtained legally. The beginning of loan ends in days and is utilized mainly by middle and low income individuals. Since 10 million people utilize Payday loans each year, these changes in regulatory of financial institutions would have a considerable effect on a large consumers group (Buckland, 2010, pp. 351).

These types of loans are approximately commonly deemed “usurious” and “predator” by the media, policy makers, and consumer advocates. Senator of state of Alabama, Lowell Barron, said “[t]he consumers being picked on here are the poorest, low-income people. There is no reason why anyone should exploit people with a short-term cash problem. Others have described payday lending as a “morally wrong practice” (Groff, Senator of Colorado), as “trap” (Catherine T. MacArthur Foundation and Michael, Housing and Policy Director at the John D, Illinois), as “running lives” (McClure, Representative of State of Arizona),” and as promulgating “astronomical rates of interest” and “unrealistic terms of payment” (Hagan, Senator of South Carolina).

By adapting same perspectives, several policy makers of the state have done hard to halt or curb operations of lenders of payday loans. It can be predicted that even additional laws with the beginning of Consumer Financial Protection Bureau and Dodd-Frank. Newly employed Director of Bureau, Richard Cordray, delivered a speech in Jan 2012, on payday loans; in which he stated that the CFPB regulators identified the credit emergency need (Du Gay, 1996, pp. 36). At the same time, it is important that these alternatives in fact facilitate consumers in meeting their needs as compare to other credit options that ...