Federal regulator clamps down on payday lending industry

NEW YORK – A federal regulator is announcing new restrictions on the payday lending industry, a move that is likely to face resistance in Congress.

The Consumer Financial Protection Bureau’s finalized rules unveiled Thursday largely reflect what the agency proposed last year. The rules are the first nationwide regulation of the industry, which had largely been left to the states.

Under the new rules, lenders will have to do a full-payment test before giving the loan, meaning the lender must determine whether the borrower can afford to repay the loan in full with interest within 30 days. Since payday lending customers are often in dire situations, this test will likely significantly curtail the industry.

The CFPB is announcing other restrictions as well, like the number times a loan can be renewed.