The Consumer Financial Protection Bureau (CFPB) has taken new steps to introduce stiff legislation on smaller dollar lending companies, better known as payday lenders. Just recently, the government watchdog group made an announcement that they were proposing new rules that lenders would have to follow. These rules revolve around borrowers having the ability to pay back any loans that they take out, and the lenders would have to be the ones to make sure consumers are able to make timely payments. The CFPB also proposed a new rule that would that would limit the collections actions lenders can use for any fees that are “in the excess.”

“Today we are taking an important step toward ending the debt traps that plague millions of consumers across the country,” said the director of the CFPB, Richard Cordray. “Too many short-term and longer-term loans are made based on a lender’s ability to collect and not on a borrower’s ability to repay. The proposals we are considering would require lenders to take steps to make sure consumers can pay back their loans. These common sense protections are aimed at ensuring that consumers have access to credit that helps, not harms them.”

This announcement has caused a bit of a tongue wagging in recent days, though some folks seem to be reacting positively to the proposals. The editors at the New York Times ran a story with the headline of: “Progress on Payday Lending” as a way to chime in on the proposal from the CFPB. The Washington Post also chimed in, with an article that said, “Payday lending is ripe for rules.”

“If you lend out money, you have to first make sure that the borrower can afford to pay it back,” said President Obama with regards to the new rules. “We don’t mind seeing folks make a profit. But if you’re making that profit by trapping hard-working Americans into a vicious cycle of debt, then you got to find a new business model, you need to find a new way of doing business.”consumer-financial-protection-bureau-logo

Nobody wants to see Americans caught in these supposed ‘debt traps’ however, the rhetoric that supporters of the CFPB’s proposals use is obviously crafted to get people behind these new rules. It really comes down to certain folks in the government and in watchdog organizations that have decided to wage what they believe to be a righteous war against payday lenders. Being as most people, even the highly educated folks out there, really don’t understand how the payday lending industry works, it is easy to see how opponents of the industry are able to get people all riled up.

A recent piece in the New York Times reported that the proposed rule changes would only affect a billion dollar industry that ‘serves the working poor’ of this country. That is s common, though misleading view of the payday lending industry. A recent study found that 80 percent of people who take out short term loans make more than 25 thousand dollars a year, and that nearly 40 percent make more than 40 thousand dollars a year. Only around 18 percent of regular payday borrowers bring in less than 25 thousand dollars per year. That 18 percent is what most people envision when they are told about the plight of the ‘working poor’ in the United States. Seeing as how this group really only accounts for a minority of the people who take out payday loans, it is easy to see how the CFPB and its supporters are skewing the facts to tug at peoples’ heart strings. The fact of the matter is that most borrowers are able to pay back their loans, aware of the fees that they will pay and responsible enough to make their loan payments on time.

With Obama being one of the biggest cheerleaders for the CFPB, it looks like everyone will have to watch this bureau get their way for some time to come. But what price will people pay in order to give this organization even more power than it already has?