The CFPB Raises the Heat on Payday Lenders

Apr 23, 2015

The federal government is starting to be more aggressive in its oversight of the payday loan industry. The Federal Consumer Protection Bureau is investigating the integrity of payday loans, noting that over 80 percent of people who receive these loans have to apply for another loan within 14 days. The CFPB wants payday lenders to review a borrowers’ ability to repay loans on time and in full before offering loans. But payday lenders believe too much scrutiny of those in need will keep funds away from borrowers.

The problem with payday loans, says the CFPB, is that they are really easy to get into but very few people can get out of them. The consumer advocate agency fears that borrowers do not have the time or money to repay the high interest on payday loans, which can lead to a vicious cycle of abusive lending.

In addition, the CFPB accuses lenders of performing abusive collection practices. For example, some lenders often rely on post-dated checks and electronic access to bank accounts. These types of payments can cause bank account overdrafts, which can be devastating to borrowers. As a result, the CFPB wants to institute a “two attempt limit” to collect on loans.

Payday lenders believe they are doing a service to low income borrowers, who could never secure a loan through traditional channels. They admit that there are some high costs associated with securing payday loans, but that only comes into effect when borrowers continually renew the obligation. They argue that until there is an alternative way for the poor or those with a bad credit history to receive loans, then payday loans shouldn’t be taken away from them.

Kurt Helwig, president of the Electronic Funds Transfer Association, agrees with payday lenders that the CFPB should be careful when restricting payday loans without being able to offer alternatives to consumers. He believes that the government should be mindful of the unintended consequences of zealous monitoring.

The CFPB is now zeroing in on payday loan merchants and their practices. But payday loan merchants can still make major profits in the lending industry. has the payday loan merchant account managers that can keep your payday business generating profit.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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