But she points out that some data show that the rules proposed by the CFPB would eliminate 50% to 80% of payday lenders because it would no longer be profitable for them to remain in business
Instead, Yu uses Activehours, a free app that links to timesheets from his part-time job doing marketing and SEO for Suprex Learning. He is able to borrow up to $100 per pay period, but some users may be able to borrow more.
“I started when I was 17 with Activehours. It’s kind of like a payday loan. We use a clock called Tsheets, and [the app] connects to Tsheets so it knows how many hours we work,” says Yu. “It’s free, there are no fees, but whenever you cash out it gives you an option to pay tips, so that’s how they make money.” Yu says he sometimes pays a tip, but not always.
According to the Activehours website, “We want to inspire people to treat each other fairly and to do more good. That’s why, when you use Activehours, we let you choose how much to pay for the service. We rely on our user community to support the work we do.”
Yu recommends that other young people looking to manage their money “try to use the free services as much as possible instead of using paid services.”
Some financial experts wonder if services like Activehours will give payday lenders a run for their money. Payday lenders require that borrowers have an income from a job, but little is done to ensure that they can afford to pay back loans.
The Consumer Financial Protection Bureau (CFPB) recently proposed a rule that would require lenders to evaluate whether borrowers can actually afford payday loans. The rule also wants to limit the number of rollovers borrowers can do. (Currently, 38 states have laws regulating payday lending, but the CFPB proposal calls for oversight at the national level.)
“You see a lot of payday loans in the south, in areas where there’s manufacturing, where people work shift jobs or they work seasonal jobs, and they have limited financial services…maybe not a lot of banks. If your job or income is not steady, even in 35 or 40 days you may not be able to pay the loan back,” says Joann Needleman, who serves on the CFPB’s Consumer Advisory Board (CAB) and is the leader of Clark Hill’s Consumer Financial Services Regulatory & Compliance Group.
“Yes, it’s important to protect consumers from loans that they either shouldn’t be in or payday loans in Ripley OH can’t afford to repay, I totally get that,” says Needleman. “But at the same time, these are a group of consumers – 30 to 40 million people who are under-banked or unbanked – who have no access to credit, and you are preventing them from using credit and having access to credit.”
Needleman says concerns about inconsistencies in payday lending policies and borrowers’ ability to repay loans do need to be addressed
For teens entering the work world for the first time, it is important that they become educated about the variety of financial products that can help – or hinder – them as they make decisions about managing money.
“What are the terms, what are the late fees? I wouldn’t just say go take out a payday loan. My advice would be if you are considering it, research it and find the best product that suits your needs,” said Needleman. “They need to understand how to manage these loans properly…it’s really an understanding of your budget and the money that’s coming in and money that’s going out.”