At the center of the regulations being considered, the people familiar with the matter said, is a requirement that lenders assess whether borrowers can repay loans — interest and principal — at the end of a two-week period by examining their income, other debts and their payment history.
Few people can, the data suggest, leaving borrowers to either roll over their loans, heaping on more fees, or take out new ones altogether. The bureau found that during a 12-month period, borrowers took out a median of 10 loans. Borrowers paid median fees of $458. The median amount borrowed was $350. And more than 80 percent of loans were rolled over or renewed within two weeks.
That churn is central to many lenders’ business, according to data from the bureau. Borrowers who take out 11 or more loans each year account for roughly 75 percent of the fees generated.
“Much of the business model is based on repeat borrowers,” said Michael D. Calhoun, president of the Center for Responsible Lending.
- NYT
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