October 5, 2017 / 4:41 PM / a year ago

U.S. releases rule to end 'debt trap' of payday loans

WASHINGTON, Oct 5 (Reuters) - The U.S. consumer financial watchdog on Thursday released its final rule restricting payday lenders’ ability to profit from high-interest loans, but the Republican-led U.S. Congress is expected to try to kill the regulation aimed at keeping borrowers from falling into “debt traps.”

The Consumer Financial Protection Bureau rule would give lenders more responsibility in ensuring borrowers can repay the loans and will not be trapped in a cycle where they must take out more debt to pay off outstanding loans and fees. The short-term, small-amount loans, which are not collateralized and historically repaid by a borrower’s next paycheck, are popular with people with low incomes and are frequently used to cover emergency expenses. (Reporting by Lisa Lambert)

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