Regulator clamps down on payday industry

The Consumer Financial Protection Bureau on Thursday finalized wide-ranging rules targeting the billions of dollars in fees collected by payday lenders offering high-cost, short-term loans.

The rules could radically reshape the payday lending industry by requiring firms to verify that borrowers can afford the debt and capping the number of times someone can take out successive loans. The rules are likely to “restrict” the industry’s revenue by two-thirds, according to the CFPB.

“The CFPB’s new rule puts a stop to the payday debt traps that have plagued communities across the country,” CFPB Director Richard Cordray said in a statement. “Too often, borrowers who need quick cash end up trapped in loans they can’t afford. The rule’s common sense ability-to-repay protections prevent lenders from succeeding by setting up borrowers to fail.”