Consumers at Risk with Installment Loans

If you are a consumer in the Chicago area, it is important to understand your rights when it comes to deceptive lending practices and the risks associated with certain types of loans. What rights do you have as a consumer? And what kinds of lending services can put consumers at risk?
Recent Report Indicates that Installment Loans May Be as Harmful as Payday Loans
According to an article in the Chicago Tribune, a study conducted by Pew Charitable Trusts has warned the public that payday loans are not the only path along which deceptive lending practices can occur. Installment loans, the study suggests, also can put consumers at risk of harm. As the article explains, “as the federal government clamps down on traditional payday loans that cripple low- and moderate-income borrowers with unaffordable payments, lenders are shifting their businesses to installment loans that can be just as harsh on struggling people.”
Installment loans, the article argues, similarly take advantage of consumers in need of short-term advances, often between paychecks. In other words, installment loans can be used in much the same way as payday loans by consumers, yet there is a big difference between the two. As the article explains, “installment loans differ from traditional payday loans that must be paid off in one lump sum relatively quickly.” Many consumer advocates argue that the lump-sum, or balloon payment, agreements that often accompany payday loans make it impossible for consumers to repay what they owe. Installment loans appear to offer the option to pay off a loan over time, yet this does not mean that interest rates and fees will be fairer to struggling consumers.
Rethinking Previous Conceptions About Installment Loans
Several years ago, an article in Time Magazine reported that consumer advocates were urging consumer to consider installment loans over payday loans, given that installment loans do not require the final, big payment associated with a payday loan. In addition, consumer advocates suggested that installment loans might actually help Americans to improve their credit ratings by giving them an opportunity to make on-time monthly payments. However, at the time that article was printed, many other consumer advocates already had begun to voice concerns about potential risks associated with installment loans.
As that article pointed out, “some installment loans have exorbitant rates, deceptive add-on fees and products, loan flipping, and other tricks that can be just as dangerous, and sometimes more so, as the loan amounts are typically higher.” The Chicago Tribune article underscored such concerns, noting that the costs associated with installment loans are not necessarily any lower than those linked to payday loans, especially in the long run.
In response, Pew has indicates that it wants both the Consumer Financial Protection Bureau (CFPB) and local governments to take action in response to the deceptive lending practices associated with installment loans because “current lending practices are predatory.”
Contact an Oak Park Consumer Protection Attorney
Do you have questions about your rights regarding deceptive lending practices? An experienced consumer protection lawyer in Oak Park can help. Contact the Emerson Law Firm today for more information.
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Comments

  1. RByrd1157January 10, 2022 at 2:07 PM

    If you are interested, you should check out this comprehensive guide to installment loans at Installment Loans. There are also FAQs to help answer any questions.

    ReplyDelete

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