Lisa took out a payday loan to help pay her rent. When she couldn’t repay the loan after 14 days she rolled it over, bringing her total debt to $800. After repaying more than $1,400, she remains stuck in the revolving door of debt associated with payday lending. It’s stories like these that the Consumer Financial Protection Bureau aims to stop with new rules to regulate the payday loan industry. But those in the payday industry say Lisa should have simply known better.

During a field hearing Tuesday on payday lending, CFPB director Richard Cordray said the bureau has been working to find the right approach to protect consumers in the marketplace for payday loans.

“As we look ahead to our next steps, I will frankly say that we are now in the late stages of our considerations about how we can formulate new rules to bring needed reforms to this market,” he said.

While many consumer advocates say meaningful reform will go a long way to helping consumers, those in the payday industry say it’s less about the regulations and more about the consumer and products available.

During a panel discussion at the field hearing, Lynn DeVault, a board member for Community Financial Services Association of America – the company behind payday lenders such as Check into Cash – said consumers routinely choose a product that isn’t right for them and that’s where problems begin.

“Consumers should take responsibility for their decisions,” she said. “If they have basic building blocks of financial education, they have the ability to budget, to know what they need, that’s the key.”

DeVault said the concern should be about developing a product that integrates an installment loan and small dollar loan qualities that could better fit consumer needs. Consumerist previously reported on a similar product, RISE Credit, which consumer advocates declared just another predatory loan.

While Cordray admitted there is a need for short-term, small-dollar loans, he says the current products don’t always help consumers.

Elliot, a disabled Vietnam Veteran from Missouri, took out a payday loan to cover the family mortgage when his wife broke her foot. Because of the situation, he ended up taking out five additional payday loans. He then spiraled into five years of paying $30,000 and lost his home.

Payday loans are meant to get consumers like Elliot out of emergency financial situations, but more and more consumers use the loans to make ends meet on a regular basis. A CFPB study released Tuesday found that payday loans are leading many consumers into longer-term, expensive debt burdens.

Oneshia Herring, legal counsel for the Center for Responsible Lending, said during the panel discussion that the payday lending industry thrives off the cycle of debt.

“A good customer is a customer who can not repay a loan,” she said. “While the CFPB can’t limit interest rates it can and should limit the time a lender can keep a borrower in debt.”

Cordray echoed the idea when he discussed the CFPB’s latest study.

“Most telling, the study found that four out of five payday loans are rolled over or renewed within two weeks and that roughly half of all loans are made to borrowers in loan sequences lasting ten or more loans in a row,” he said. “From this finding, one could readily conclude that the business model of the payday industry depends on people becoming stuck in these loans for the long-term, since almost half their business comes from people who are basically paying high-cost rent on the amount of their original loan.”

Federal regulations have already been enacted to govern certain groups affected by the payday lending industry. The Military Lending Act prevents predatory lenders from gouging military personnel with exorbitant interest rates and mountains of fees, although some lenders have found ways around the regulations.

Additionally, new federal banking regulations went into effect earlier this year that essentially caused banks like Wells Fargo and U.S. Bank to discontinue their payday loan-like direct deposit advance programs.

Even if the CFPB is successful in enacting regulations over the payday industry, they will still face a long road to ensuring consumer protection.

“The biggest challenge is finding a short-term loan that is safe, transparent, affordable and based on sound underwriting standards based on ability to afford a loan,” Pamela Banks, senior counsel for Consumers Union, said during the panel discussion.

One possible alternative being discussed is allowing the United States Postal Service to offer financial services, an option that’s been endorsed by Sen. Elizabeth Warren.

Following the discontinuation of bank payday loan products the National Consumer Law Center urged them to follow certain criteria, including capping the annual percentage rate at no more than 36%, when considering new small loan programs for consumers.

“There’s no denying there’s a need out there,” Banks said. “Our job is to make sure the product is safe.”

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