The CFPB's potential payday loan proposal would require lenders to make sure a borrower has the ability to repay the loan before they extend credit, and to limit the number of times a loan can be rolled over. In theory, that would mean borrowers likely to get caught in cycles of repeat borrowing would not be able to take out that first loan. The proposal would also extend to other forms of credit in which lenders gain access to a borrower's paycheck or bank account to take repayment.
The Community Financial Services Association of America, which represents payday lenders, said it "welcomes a national discussion" on providing short-term credit, but argued that "payday loans represent an important source of credit for millions of Americans who live from paycheck to paycheck."
The association warned that new rules should be "grounded in rigorous research" and that rulemakers should consider the impact of new regulation on lenders that are small businesses.
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On the other side, some consumer groups said the bureau's proposals need to go further. Lauren Saunders of the National Consumer Law Center applauded much of the plan but said it contains more loopholes for lenders than it should.
"Lenders must be judged both on whether they evaluate affordability before making a loan and also on whether those loans default, roll over or are refinanced in significant numbers," she said in a prepared statement.
The bureau is holding a field hearing on payday lending in Virginia and plans to consult the Small Business Review panel before proceeding with rulemaking.