Jonathan Matthews has a now-familiar reaction to the CFPB'sproposed payday lending rules.

The sheer volume of the regulations — some 1,300 pages — willdrive credit unions out of the short-term lending business,Matthews, president of the Southland Federal Credit Union, alow-income designated community credit union that serves threecounties in Texas, told the CFPB.

But even as credit unions rail against the proposed CFPB rulesgoverning short-term loans, religious groups, labor unions andcommunity activists have told the agency that the proposed rulesaren't strong enough and will allow predatory lending tocontinue.

“There are loopholes that must be addressed in order to treatall people, especially the least among us, with the dignity andrespect all of us on this earth deserve,” the Sisters of Charity inDubuque, Iowa., said. And they added, “Lenders cannot be alloweddirect access to bank accounts.”

The comment period on the proposed CFPB rules closed on Oct. 7,with hundreds of thousands of comments filed. An exact number isdifficult to obtain, since the totals reflect only those that havebeen publicly posted.

At the same time, the CFPB is facing another problem. AWashington appellate court has ruled that the agency's organizationis unconstitutional, since it is headed by a director with littleaccountability.

It's clear that thousands of the payday comments on both sideswere generated by campaigns mounted by organizations with aninterest in how the rules are written.

Groups such as the Community Financial Services Association ofAmerica, a trade group representing payday lenders, have sectionson their websites with direct links that allow customers to commenton the rules.

Some of the letters written by credit unions are virtuallyidentical — a sign that a form letter had been circulated in thecredit union community.

The letter states that the rules would drive credit unions outof the short-term lending business and asks that credit unions beexempt from the final regulations. Those comments echo those of theNCUA, which also said that it, and not the CFPB, should beresponsible for supervising short-term loans made by creditunions.

In issuing the rules in June, the CFPB said that the regulationswere needed to rein in the abuses by payday lenders, followingwidespread and well-publicized reports of industry abuses.

The agency defined a payday loan as a short-term loan that istypically due on the borrower's next payday. Borrowers aretypically required to give lenders access to a checking account orwrite a post-dated check for the full balance. The loan's cost mayrange from $10 to $30 for every $100 borrowed and sometimes carriesan APR of almost 400%.

Through its payday alternative program, the NCUA permits federalcredit unions to charge an interest rate of 1,000 basis pointsabove the maximum interest rate established by the NCUA board andan application fee of not more than $20. The loan would need to bestructured with a term of 46 days to six months, with substantiallyequal and amortizing payments due at regular intervals and noprepayment penalty. The minimum loan size would be $200 and themaximum would be $1,000.

Some groups said the CFPB rules were welcome, but should domore.

The San Mateo Labor Council in California provides groceries anddirect hardship assistance to families, Executive Secretary JulieLind Rupp told the CFPB. Payday loans hamper the council's efforts,she added.

“Predatory payday loans, vehicle title and high cost installmentloans sabotage our best efforts at securing economic stability forworkers and families in our county,” she wrote.

She — and many others — recommended that the final rules close aloophole she said would allow six, 400% APR payday loans to be madewithout any evaluation of a borrower's ability to repay themoney.

In addition, she said, longer term loans with high originationfees should be included in the ability-to-pay evaluation and therules should prohibit the flipping of borrowers from one loan toanother.

The Homeless and Housing Coalition of Kentucky echoed thosesentiments.

“The typical payday borrower is unable to repay so quickly, andends up taking out a second loan to repay the first, withadditional fees,” the group's executive director, Curtis Stauffer,told the CFPB.

Stauffer said his organization has pushed for a state law thatwould reduce the interest rate of payday loans to 36% on anannualized basis. Those efforts have not been successful.

“The proposed rule would generally move Kentucky toward theultimate goal of safe and just lending by requiring the lender todetermine the borrower's ability to repay,” according toStauffer.

He added that any final rule should make all loans subject to anability-to-pay test and should stiffen other requirements in theproposed regulations.

The Coalition on Homelessness and Housing in nearby Ohio alsothrew its support behind stricter rules.

“The draft rules are a good start, but given payday and cartitle lenders demonstrated propensity to exploit unintentionalloopholes to undermine the spirit and the letter of the law, weurge you to eliminate weaknesses in the final regulations,”Executive Director Bill Faith wrote. “Stringent CFPB rules have thepotential to finally put a stop to unaffordable loans that siphonoff so much of borrowers wages that they often have too little leftover to pay the rent or mortgage.”