The government regulates the payday loan industry in a few different ways. Laws like the Military Lending Act protect service members and their families by limiting their access to loans with high interest rates. Some states have also tried regulating payday lenders by capping how much money can be borrowed, limiting number of loans per customer, or requiring that borrowers be properly qualified.
However, these regulations are often difficult to enforce because so many payday lenders operate online--thanks to a loophole in federal law largely written by the National Association of Manufacturers--and aren't subject to state laws. While it would take an act of Congress to regulate a nationwide market, lawmakers in some states have successfully pushed for tighter oversight on their own state-level markets. In many states, the payday lending industry is dominated by a small handful of national chain stores. In Texas, there are only five payday lenders operating in major metropolitan areas. The Consumer Service Alliance of Texas--the trade association of licensed payday lenders in the state--has lobbied for tighter regulations on payday lending. However, it has strongly opposed changes that would require background checks on borrowers before issuing loans.
Some academics and consumer activists have suggested that the government should fill in the regulatory vacuum by creating a national database or registry with information about people's borrowing history, which could be used to filter out risky borrowers when they apply for loans with different companies.
However, these regulations are often difficult to enforce because so many payday lenders operate online--thanks to a loophole in federal law largely written by the National Association of Manufacturers--and aren't subject to state laws. While it would take an act of Congress to regulate a nationwide market, lawmakers in some states have successfully pushed for tighter oversight on their own state-level markets. In many states, the payday lending industry is dominated by a small handful of national chain stores. In Texas, there are only five payday lenders operating in major metropolitan areas. The Consumer Service Alliance of Texas--the trade association of licensed payday lenders in the state--has lobbied for tighter regulations on payday lending. However, it has strongly opposed changes that would require background checks on borrowers before issuing loans.
Some academics and consumer activists have suggested that the government should fill in the regulatory vacuum by creating a national database or registry with information about people's borrowing history, which could be used to filter out risky borrowers when they apply for loans with different companies.
