Borrowing e-payday loans is getting harder and harder day by day, thanks to the agencies responsible for regulating the industry. The agencies of the likes of CFPB (Consumer Financial Protection Bureau) have started using the behavioral economics’ insights to regulate the economy by creating embargoes and finishing of the products altogether rather than solving the shortcomings in the marketplace. For this they are regulating consumers. Why you ask? Because, apparently they are less attentive to detail, this can lead them to make poorer choices than government officials.

According to a study, consumers are less rational in their choices, and that fact has become the stimulant in the changing focus of regulations, namely from service to consumers. A few experts are of the opinion that consumers save less than they should and also they tend to overestimate their pay ability and underestimate their debt obligations while making use of credit opportunities. This right here is the thought process of policy-makers and academicians who are regulating consumer credit in the country.

The latest targets of this regulator group are payday lenders. The said groups of people criticize the cash loan lenders for they deem as predatory lending. According to them fast cash lenders take the undue advantage of low cognitive ability of consumers.

Payday lenders usually provide credit for about two weeks which is payable typically at the time borrower’s next payday, with interest   plus fees of loan amounting to around $15 for every $100 borrowed.

The policy response by CFPB is yet to be defined but it will most likely include the measures such as limiting the number of rollovers.

Realistically speaking, a typical payday loan customer has a low income and lacks access to credit cards and home equity lines. The cognitive abilities of the said customers are at par with other credit users, with only difference between both being economic circumstances. They are left with a number of less desirable options such as overdraft fees, credit card cash advances, and pawnshops or selling off their possessions. Thus, removing one option just makes them choose the less preferred alternative.

CFPB calls itself, 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. But, its actions indicate otherwise. Rather than empowering consumers it is trying to take away whatever limited options they do have.

The CFPB has been issuing rulings and thinly veiled threats to wide plethora of products in the marketplace, including the ones it was not supposed to interfere with, for example auto lending.

Government agencies going haywire are not something unheard-of. The novelty in this case being how it goes about it. It targets products and sometimes the entire category of products that consumers may have difficulty in understanding and puts regulations and other market pressure to either reduce, or terminate their businesses.

It seems consumers now need protection from a consumer protection agency. A start in the direction comes from a recent federal court ruling that called its structure unconstitutional.

The CFPB’s looking out for consumers’ perceived lack of willpower or intelligence means accepting that agency officials can make better decisions for us than we can.

The CFPB, rather than working in nuanced and driven manner prefers to drive out certain options altogether such as e-payday loans. Because, it is easier to defame and berate the services rather than accepting the exact manner in which they are utilized by consumers. Institutional checks are necessary for government agencies to be effective. Protection is the job of government but balance is the key.