Rules for Payday Loans Proposed by the Consumer Protection Agency

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The rules presented to a small business review panel are likely to spark a new round of industry lobbying, said Senator Jeff Merkley, a Democrat of Oregon.

“They should instead strengthen this proposal by making absolutely sure that it is free of loopholes that would allow these predatory loans to continue trapping American families in a debt vortex,” he said.

Mr Cordray introduced the rules Thursday at a hearing in Richmond, Virginia, flanked by the attorney general and consumer groups from across the country. At the beginning of the hearing, Virginia’s Attorney General Mark Herring said the choice of location was appropriate and described the state as “the predatory loan capital of the East Coast,” a description he found shameful.

The hearing provided a rare glimpse into the forces lining up on either side of the payday loan debate. On one hand, there were a number of people who were breaking the rules, from industry groups to happy customers to dozens of payday loan company employees – many wore yellow stickers that said “Equal Access, Credit For All.”

On the other hand, there were consumer associations, housing counselors, bankruptcy attorneys and individual borrowers, all of whom called for crackdown on the expensive products.

Both sides had their horror stories. Some reported stores being forced to close, while others described how such loans caused tremendous pain and fees.

At one point, a woman in a neon pink hat who only mentioned the name Shirley burst into tears and said that her cancerous cousin would be dead without the loans.

Martin Wegbreit, a Virginia legal aid attorney, described payday loans as “toxic” and noted that “they are the leading cause of bankruptcies just behind medical and credit card debt.”

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