The U.S. Federal Reserve Bank of New York (FRBNY) says it is preparing to issue new rules that would make it easier for borrowers to pay down debt with fast cash and home loan loans.
Under the proposed rule, borrowers would be able to take out a loan, pay it off, and get a cash payment.
The Federal Reserve says the new rules will ease the burden on the financial system and allow consumers to have more time to make decisions.
The Fed is expected to issue its rule on Thursday.
In an effort to boost the economy, the Federal Reserve has been encouraging banks to offer loan products that can be paid off in less than 30 days.
The Fed said in April it will extend the rules that allow borrowers to make monthly payments.
“We expect this rule to help to increase loan originations, lower interest rates and create jobs,” Fed Vice Chairman William Dudley said in a statement on Thursday, adding that the rules will help to address the economic slowdown and debt levels.
“While the rule is still in development, it’s expected to lead to more consumer spending and a stronger economy,” he added.
Last week, the Fed raised interest rates again to close the gap with the U.K. to zero.
The central bank said it will continue to maintain a 0 percent rate for at least another year.
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The new rules also would give borrowers a longer period of time to pay off loans.
In a letter sent to financial institutions, the bank regulators said that they believe “that the existing statutory requirements for loan repayment would have a deleterious effect on the economy.”
The new regulations also would require borrowers to be fully informed about the terms and conditions of their loans and provide lenders with access to information on debt repayment plans.
Some experts have predicted that the new requirements will spur lending.
Mortgage lender and consumer advocate Larry Gudell said in an interview with CNBC that he believes the new regulations will help ease the economic slump, especially in the short-term.
However, he said the Fed may have underestimated the potential of new lending.
“It was really the banks that really didn’t think they would get a big boost in terms of loan origination,” he said.
“They just didn’t see that it would be as big of a factor in the economy as they expected.”