Payday Loans Get U.S. Consumer Bureau Scrutiny as ‘Debt Traps’

The U.S. Consumer Financial Protection Bureau is considering action to limit the impact of payday and other short-term loans that can become “debt traps” for borrowers, said Director Richard Cordray.

“Financial products that can trigger a cycle of debt may generate substantial unexpected costs through repeated use, which can disrupt the precarious balance of consumers’ financial lives,” Cordray told the National Association of Attorneys General in a speech in Washington yesterday. “Often these products are marketed as short-term solutions to an emergency need, obscuring the risks inherent in the terms of the loan.”