By Phillip Lucas | The Associated Press

BIRMINGHAM (AP) — Civil rights advocacy groups and others are praising a federal proposal announced Thursday that seeks to tighten short-term lending regulations and are urging consumers to weigh in during a 90-day public comment period.

The Consumer Financial Protection Bureau is looking to require lenders to prove that borrowers are able to repay money without taking out additional loans and give additional warnings before debiting borrowers’ accounts.

The federal proposal comes as states including Alabama look to strengthen rules governing payday and auto-title lending. Alabama launched a payday-lending database in 2015 to enforce a law that limits consumers to having no more than $500 in payday loans at once. A bill that would have given borrowers up to six months to repay loans failed in the Legislature this year.

The Montgomery-based Southern Poverty Law Center is encouraging consumers to participate in the CFPB’s 90-day public comment period on the proposal.

“In Alabama, we have repeatedly seen consumers facing tough economic times turn to these lenders only to discover, after it’s too late, that they intentionally trapped them in a cycle of unaffordable debt,” SPLC senior staff attorney Sara Zampierin said in an emailed statement.

Arise Citizen’s Policy Project analyst Stephen Stetson said the proposals are a step in the right direction, but more attention is needed on high interest rates associated with short term loans. Stetson said in a statement that yearly interest rates for payday loans can be as high as 456 percent and 300 percent for auto title loans.

“We would like to see rules that address the affordability of the loan directly. We don’t just want to see the lenders making a cursory check, you know?” Stetson said. “We don’t want to just see an additional layer of paperwork applied to the process. And most importantly, we don’t want lenders to be able to tweak their products to get out from under the rule.”

Max Wood, president of the lending trade group Borrow Smart Alabama, said the proposals could effectively eliminate much of the short-term lending industry and leave many consumers with virtually no options during a financial emergency.

“The bottom line is that if the rules go into effect as proposed … 70 to 80 percent of the industry will no longer exist,” Wood said.

“There is a large demand for this service and we don’t want to see it go away for the sake of the consumer,” Wood said.

Payday lenders in 2013 filed a lawsuit to try blocking the lending database from being launched, but the Alabama Supreme Court sided with the state. Stetson said he expects similar lawsuits to follow the implementation of any regulatory tweaks.

According to Wood, more than 300,000 Alabamians use short-term lending services. Alabama State Banking Department Associate Counsel Anne Gunter, however, said that as of Sunday more than 1.7 million short-term loans had been taken out since the lending database was launched in August. The loans average about $321 each and carry about $55 in interest, she said.

“The demand is real and the demand is an important component,” Stetson said. “But just because somebody’s hungry doesn’t mean you should feed them poison.”