Here’s why we need payday lenders

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It is easy to find fault with payday lenders.

For many American households still struggling to mend the financial devastation left by a wave of abusive mortgages that brought the global financial system to pieces, with companies charging triple-digit annual interest rates for short-term loans are an easy target.

Stricter government regulations for them, however, are unlikely to do much to help their repeat customers.

Federal regulators on Thursday announced a sweeping crackdown on a cottage industry of companies that provide short-term, high-interest loans to borrowers who have nowhere to turn for the next monthly rent check or next mortgage payment. car.

The Consumer Financial Protection Bureau, established by Congress in response to mortgage credit abuses of the early 2000s, said Thursday that vulnerable borrowers must be protected from predatory practices that create “debt traps” for millions of people. households living on insufficient wages at the Next.

“Too many borrowers looking for a short-term cash flow solution are struggling with loans they cannot afford and are going into debt over the long term,” said CFPB director Richard Cordray, in a press release.

Yet whether the rules are passed or not, U.S. households at the bottom of the income scale will continue to struggle to make ends meet until wages begin to rise further in line with the rest of the workforce. .

Read moreRaising the minimum wage – a long and difficult struggle

Even though the US economy has recovered from the Great Recession, the benefits of wage gains have been heavily skewed in favor of those at the top.

Since 2000, weekly wages have fallen 3.7 percent, adjusted for inflation, for workers in the lowest 10 percent, and 3 percent in the lowest quarter, according to the Pew Research Center . For those near the top, real wages rose 9.7%.

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