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Passage of financial overhaul bill has made creditors and lenders concerned including the short term and payday lenders including the responsible and trusted online payday loan lenders.

One of the outcomes of this bill is creating of a new organization called Consumer Financial Protection Agency  CFPA, a new federal government, bureaucracy, that will create rules and regulations in order to further regulate the creditors and lending institution. Some of these regulations may include short term loans limit, cap on fees and interest rates, and limiting number of amount of allowed rollovers.

Payday lenders are concerned about the extent of power and influence of CFPA, and its impact on their businesses. Many States and local cities and governments have already imposed restrict regulations on payday lenders, and some have even banned them. Hence payday lenders believe any additional restrictions from the federal government any of its agencies may hurt their business, forcing them close many of their payday stores, or even worse driving them out of business.

Many financial experts and economists believe that over-regulations of financial institutions and  lenders, could have negative consequence and worsen the US economy because smaller creditors and lenders will go out of business and larger ones will have to downsize hence resulting thousands of jobs being lost.

Lending institutions provide millions of jobs to the Americans. The payday lending industry alone employs thousands of those jobs nationwide, and if the industry was to disappear,  so would thousands of jobs they provide claim many payday lenders.

States that have banned or over-regulated payday lenders have already seen the impact of their actions. Arizona for example was the most recent State that banned short tern lending. While they put their own residence in despaired need of credit options, they also cost the State millions of dollars because as the payday lenders shut down, over thousand of residence of Arizona became unemployed.

Payday lenders, along with other lending institutions,  believe that the answer to fix US financial crisis does not lie on further regulating and it many cases over regulating it. The solution is to promote responsible lending by expanding credit options for the consumers, and to educate the consumers so they don’t borrow beyond their means.

Payday loans, also known as payday advance or cash advance loans are becoming very popular these days due to bad economy. Americans are doing everything they can to stretch their dollars and paychecks.  However financial emergencies do happen and since banks isn’t lending as easily and credit cards are reducing their limits (and in many cases closing credit cards), it is becoming more difficult to get financing for financial emergencies.

That is when and where other type of short term loans such as payday loans and title loans come to play. Payday loans in particularly re becoming very  popular online. Simply because they are easier to get. A person who needs cash can search for payday loan online with a direct lender or a payday loan affiliate. And since payday loans are usually below $1000, that person can apply for multiple payday loans from different payday loan lenders. But that is where the problem starts.

Most people who are in need of a short term cash loan because they need money for bills, will not shop around enough to find the cheapest and most affordable loans. It has been documented that average payday lenders charges more than 400 annual APR on payday loans because of the nature of the loan (very high risk and expensive to the lenders too). And therefore the borrows default, piling up debt, and hurting their credit score that eventually can drive them to bankruptcy.

So our advice is that, if you ever have to take a short term loan such as a payday loan, make sure you have tried borrowing money from other sources such as friends or families, and if you end up having to take a payday loan, make sure you educate yourself about payday loans.

AboutPaydayLoan.com, a payday loan resource, reports that starting Thursday, July 1st, 2010, all payday loan stores in Arizona will have to stop payday loan services.

Speaking in front of a payday loan store, the Arizona attorney general Terry Goddard announced “Operation Sunset” is designed to “crackdown” on payday loans in the state, and payday advance loan stores will no longer be able to conduct business.

Payday loan lenders had a 10 year exemption on Arizona’s financial regulation cap on annual interest rates approved back in 2000. That 10 year exemption will expire at the end of June and it will not be renewed because it didn’t win the votes of Arizona residents. Nevertheless, the state of Arizona allows short term loans of 36 percent or lower, but payday loans will still be banned even if they manage to keep the interest at that level.

The main reason payday loans will be banned all together is that it would be too difficult to monitor interest rates, or enforce an interest rate cap, in the market. “You may have some payday lenders charge a higher interest to customers that have been denied by short term loans,” says a payday loan expert. This means that over 600 payday stores either have to close their stores or change their business model . Over 200 of these stores have already requested to stay open in order to change their business model and transform to a completely different type of business.

There are also concerns that these “new” stores may try to push payday loans under a different name or foster different types of loans such as title loans or other short term loans. Starting in July, the state of Arizona will have a new hot line where citizens can report signs of payday lending within the state. The Operation Sunset hot-line number is 1-866-879-5219.

Opponents of this move argue that eliminating such loans will only hurt the consumer, especially those who lack options and rely on payday loans, either because they have bad credit and\or have no assets for loans through a federal bank.

Shutting down payday stores and payday lending will result in a loss of hundreds of jobs if not thousands and it will have a direct negative effect on the State economy. There are also concerns that many of the Arizona payday loan customers, in particular those who are close to the state border lines, will drive out to neighboring states such as California, Nevada, New Mexico, or Utah where payday loans are still legal. More conveniently, they could apply for online payday loans, but many direct payday lenders such as Pay1Day.com will not fund the request of a personal payday loan to the citizens of the state of Arizona for fear that they will not be reached for repayment.