7 On Your Side looks at proposed changes to payday loans

SAN FRANCISCO (KGO) -- This payday lender is in San Francisco Civic Center, but it could just as easily be in the suburbs.

Payday lenders have gained a foothold in many of our neighborhoods. New federal regulations being considered would help borrowers deal with interest rates of nearly 400 percent.

An analysis released on Tuesday by the consumer group CALPRIG of 10,000 complaints to the feds found 9 out of 10 involve inability to repay. Regulators are trying to come up with ways to fix that.

"If you're someone who's taking out two or three loans or four or five or six loans in one year, you're paying back with average interest rates of 391 percent," explained Emily Rusch with CALPRIG.

RELATED: Missouri man paid $50,000 in interest on $2,500 in payday loans

One man who asked not to be identified, told us why he took out a payday loan.

"The holiday season, I overspent a little too much money and I had to take care of some bills with this," he said.

CALPRIG believes payday lenders provide a service to those who can't get traditional loans from banks.

But the group would like to see greater restrictions to prevent a never ending debt trap. The proposed regulations would prevent payday lenders from giving a loan to anyone who's been in a short term loan for more than 90 days.

CALPRIG would like to see the safeguard to be made stronger.

"We want to see them have to check for that affordability much sooner," said Rusch.

But a payday lending trade group says that's not necessary, saying it members check the credit worthiness of every borrower.

The Community Financial Services Association of America told 7 On Your Side ABC7 News: "Consumers are overwhelmingly satisfied and value payday loans as a credit option. Payday loan complaints are also on a markedly downward trend."

The group says payday loans make up less than two percent of all complaints to the Consumer Financial Protection Bureau.

But the Consumer Financial Protection Bureau tells 7 On Your Side the number is much higher when you include payday lenders accused of unfair debt collection practices.

CALPRIG is optimistic the reforms approved will be significant.

"It could be extremely significant, especially for the consumers who are taking out these loans over and over and over again," said Rusch.

If you have comments about the proposed regulations, you have until October 7 to submit them to federal regulators. Or you can click here to do so.