The Consumer Financial Protection Bureau (CFPB) recently announced new rules to crackdown on the multibillion dollar payday loan industry, which often relies on borrowers who cannot pay their loans off. In turn, their inability to pay back the loans generates fees and profits for the lender, while leaving the borrower in a vicious cycle known as the "debt trap."

The CFPB, the agency created by President Barack Obama following the 2008 economic downturn, proposed regulations that will protect consumers from short-term payday loans, which can easily generate interest rates of up to 400 percent.

Although the regulations would not ban short-term loans with ridiculously high interests, it would require lenders to make sure that borrowers have the ability to repay any money that they borrow.

"If you lend out money, you have to first make sure that the borrower can afford to pay it back," President Obama said during a speech at the Lawson State Community College in Alabama on Thursday, according to The New York Times.

"We don't mind seeing folks make a profit. But if you're making that profit by trapping hard-working Americans into a vicious cycle of debt, then you got to find a new business model, you need to find a new way of doing business."

The president also took a shot at congressional Republicans who passed a budget bill on Friday that would benefit wealthy Americans at the expense of the middle and working class.

"This is just one more way America's new consumer watchdog is making sure more of your paycheck stays in your pocket," Obama said. "It's one more reason it makes no sense that the Republican budget would make it harder for the C.F.P.B. to do its job." He vowed to veto any attempt that "unravels Wall Street reform."

Nonetheless, consumer advocates say that the CFPB's proposal for new lending rules does not go far enough to protect vulnerable consumers who are desperate for cash.

"We are concerned that payday lenders will exploit a loophole in the rule that lets lenders make six unaffordable loans a year to borrowers," said Michael D. Calhoun, the president of the Center for Responsible Lending.

Likewise, Martin Wegbreit, a legal aid lawyer in Virginia, called payday loans "toxic": "They are the leading cause of bankruptcy right behind medical and credit card debt."

On the other hand, payday lenders say they welcome sensible regulation, but any rules should preserve credit, not choke it off.

"Consumers thrive when they have more choices, not fewer, and any new regulations must keep this in mind," said Dennis Shaul, the chief executive of the Community Financial Services Association of America, an industry trade group.

"The bureau is looking at things through the lens of one-size-fits-all," added Shaul, according to The Associated Press.