Payday loans are charging individuals "obscene" levels of interest, a leading Conservative politician has said.
However, payday loan companies have claimed the higher risk clients they offer loans to and short-term nature of loans - often repaid after a month – mean comparing rates with standard loans is unfair.
The statement also says Obama plans "to extend a 36 percent interest cap to all Americans" and "require lenders to provide clear and simplified information about loan fees, payments and penalties."
Payday loans are short-term, unsecured loans offered to cash-strapped consumers that typically mature in two weeks or on the borrower's next payday. The loans are often priced at a fixed-dollar fee, but the underlying annual interest rate is usually near 400 percent or more. Obama's proposed 36 percent cap would effectively ban current industry practices.
