6 Borrowing Practices That Governments Are Trying to Outlaw

Governments are trying to outlaw some borrowing practices.

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Money may make the world go round, but not all money moves are welcome at the top. Some borrowing practices have gotten so wild, so questionable, and sometimes so damaging that governments are stepping in with a giant red flag. From slick loopholes to outright sneaky plays, certain tricks are pushing lawmakers to the edge of patience.

These are the kinds of financial habits that might feel clever in the short run but raise eyebrows when the bill eventually comes due. Here’s a look at six borrowing practices that officials are working overtime to put on the chopping block.

1. Payday Loan Rollovers

Payday loans already come with sky-high interest rates, but rollovers turn them into a never-ending trap. Borrowers who can’t pay on time often “roll over” their loans, essentially pushing the due date further while stacking on new fees. Governments are cracking down on this because it locks people into debt spirals that are almost impossible to escape.

The practice is being outlawed in more places as consumer protection agencies highlight how damaging it can be. Lawmakers argue that if a loan takes 20 paychecks to pay off, it was never a fair deal in the first place.

2. Balloon Payment Mortgages

Balloon payment mortgages might sound harmless, but they hit like a financial wrecking ball. They lure buyers in with super-low monthly payments, only to slam them with a massive final bill that can equal half the original loan. Regulators view this as a ticking time bomb, especially for unsuspecting borrowers who assume their payments will stay steady.

Governments are trying to outlaw or heavily restrict these loans to keep buyers from losing their homes at the last second. The goal is to make mortgages transparent and predictable instead of a trapdoor surprise.

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3. Pension Obligation Bonds

This borrowing move might seem brilliant on paper, but it often crashes in practice. Cities and states issue bonds to fund pension systems, betting that investment returns will outpace the borrowing costs. The gamble is enormous: if markets dip, taxpayers are left holding the bag. Critics argue it’s basically using borrowed money to play the stock market with retirees’ futures on the line. That’s why more governments are pushing to ban or strictly limit pension obligation bonds before they backfire again.

4. Cross-Border Tax Arbitrage

Some companies borrow or shift debt across international borders to minimize taxes, playing one country’s laws against another. While technically legal, it drains public coffers and gives global giants an edge that regular businesses can’t match. Governments are labeling this as unfair borrowing behavior and moving fast to close the loopholes. International agreements are being forged to shut down these maneuvers before they hollow out tax bases. Lawmakers see it as a necessary step to level the playing field and protect national revenues.

5. Predatory Auto Title Loans

Auto title loans put people’s vehicles on the line for quick cash, often at jaw-dropping interest rates. Borrowers risk losing their only way to get to work if they can’t make payments on time. Governments are stepping in because the loans disproportionately target vulnerable groups who have few alternatives. Many states are passing laws that either cap the interest rates or ban the loans altogether. Regulators argue that no one should lose a car worth thousands over a loan that started with just a few hundred dollars borrowed.

6. Shadow Banking Loans

Shadow banking might sound mysterious, but it’s really just lending done outside traditional banks—often without the same rules or oversight. Hedge funds, private equity groups, and online lenders are jumping in with loans that skirt regulations. The danger is that when borrowers get in over their heads, there’s little consumer protection or safety net.

Governments are trying to rein this in before it causes financial shocks that ripple across the economy. More oversight is being introduced to drag shadow banking out of the shadows and into the spotlight.

The End of Sneaky Borrowing

From payday rollovers to shadow banking, borrowing tricks are losing their shine under the glare of regulators. Governments are working to slam the brakes on these practices because they can leave people, communities, and even whole economies on shaky ground. The push to outlaw them is about transparency, fairness, and preventing disasters before they strike. Borrowing will always be a part of modern life, but the goal is to keep it smart and safe rather than reckless and ruinous.

What are your thoughts on these outlawed practices? Drop a comment and share your take.