New crackdown announced on payday loan industry

New crackdown announced on payday loan industry

MONTGOMERY, AL (WSFA) - Another crackdown is coming on the payday loan industry.

Federal regulators announced on Thursday that a proposed set of rules, designed to protect people from what critics call debt traps, has been introduced.

Advocacy groups here in Alabama are urging consumers to support the proposal to tighten short term lending regulations.

The proposed federal regulations include requiring the lender to analyze and determine the consumer's ability to repay the loan. They also limit the lender's ability to withdraw payment from a consumer's account, and require the lender to establish and follow a compliance program.

State representative Danny Garrett, who has sponsored bills to regulate the payday loan industry in Alabama, says that the federal proposals provide framework for states to use.

Garrett says it's up to Alabama however to tackle predatory lending at a local level.

"The people borrowing the money are having to renew loans on average of eight to ten times," said Garrett.

The Southern Poverty Law Center and Arise Citizen's Policy Project are encouraging consumers to participate in the Consumer Financial Protection Bureau's 90-day public comment period.

The new guidelines do not need congressional or other approval to take effect, and could make payday lenders start making changes as soon as next year.

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