Unlike with regular lenders, payday loans are typically expected to be paid back in one lump payment. And the terms of the loans are usually pretty short, like from one to six months. The result is that most people who go to payday lenders typically people who are already having problems in their financial lives don't end up paying on time. Their existing loans then get flipped into new loans with more fees. This process continues as long as it takes the person to pay back the loan. Often by the end of the process, the loan fees can amount to double or triple the size of the original loan.
Consumer advocates would like the CFPB to push for a rule that would limit the number of times a payday loan could be flipped into a new loan. After that, the lender would have to work out a payment plan that capped the loan's final fees, or convert the loan into a typical installment loan with minimum monthly payments that could be made penalty-free.
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