With an aim to limit 'debt traps', the Consumer Financial Protection Bureau (CFPB) has come up with a new proposal. The proposal includes rules that would stop many high-cost loan products, like payday loans and auto-title loans.

The proposal announced on Thursday will require lenders to think before whether or not a borrower will be able to repay the loan. The CFPB said that there is a need to change the existing model, as it does not consider whether or not customer would be able to repay the loans.

Main aim of the model should be to consider the ability of borrower to repay loans. "Extending credit to people in a way that sets them up to fail and ensnares considerable numbers of them in extended debt traps, is simply not responsible lending", affirmed CFPB Director Richard Cordray.

Rather than helping customers, it would affect them. For a long time, this matter needed attention and now it needs a call for action. Recently released blueprints will act as the basis for discussions between regulators and industry.

The bureau continues to make regulations for small-dollar credit products. It shall, however, be noted that the CFPB does not have rights to control the interest rates. But their focus is on loan affordability, which means some lenders would have to change their business models.

As per CFPB, landers earn $8.7 billion a year in interest and fees. The products are considered as two-week loans and borrowers handover a post-dated cheque or their bank account details, in return to have quick loans.

Payday loans are allowed in 36 states and auto title loans in 25 states. The proposal has made it clear that the rules would not only be applicable on various types of loans, but will also cover both short and long-term loans.