The federal government has proposed a tough, new rule that would impact payday loans, auto title loans and certain high-cost installment and open-ended loans.
The Consumer Financial Protection Bureau announced the proposed rule in Kansas City, Missouri as part of its effort to end the "cycle of debt" some borrowers encounter.
The rule would require payday lenders to apply a "full-payment" test to determine whether borrowers have the ability to repay a loan without having to re-borrow.
The long-awaited rule was met with criticism from the payday loan industry.
The Tennessee Flexible Finance Association denounced the proposal and said it would restrict access to small-dollar credit for thousands of Tennesseans and force them to borrow from unlicensed lenders.
Payday lenders have said the proposal would force some businesses to close.
One group critical of the payday loan industry called a news conference at Legislative Plaza and praised the rule as an "important first step."
The Executive Director of Tennessee Citizen Action, Andy Spears said, "We are thrilled the CFPB has finally taken action to stop the deception and abuse that run rampant in the payday lending industry."
The group promised to enlist help from the faith community to speak out in support of the proposed rule.
"Taking advantage of your neighbors for profit is not an act of faith. It's something that breaks down and tears down the community," Reverend Alec Miller with Cooperative Baptist Fellowship said.
Payday lenders promise to fight the proposed rule. They say it preempts Tennessee laws that have regulated finance in the state for decades.
The federal government is now accepting public comments on the proposed rule.
Officials will decide after the comment period ends in September whether it should go into effect.
