WASHINGTON — Lawmakers examined concerns about alternative lending products such as payday loans on Wednesday, though consensus on what, if any, changes are needed to the industry remains elusive.

The Senate Banking subcommittee hearing came on the heels of a new study released by the Consumer Financial Protection Bureau this week that provides a fresh look at how consumers use payday loans and the pitfalls they may face. The agency said it is getting close to releasing new regulations for the industry, which has been previously been subject to state rules.

But as the CFPB moves forward, the partisan divide on the efficacy and fairness of alternative lending products remains stark in Congress, with several Republican lawmakers raising concerns about regulatory efforts that they argue will drive short-term lenders out of business.

"What about allowing free men and women to decide what works for them?" said Sen. Pat Toomey, R-Pa., the top Republican on the Senate financial institutions subcommittee. "I've got to say there's a breathtaking underlying arrogance by the presumption of wealthy people who have never been in those circumstances that they know better than those people who make these 'foolish' decisions and borrow money from these institutions."

GOP senators also continued their attack on Operation Choke Point, a Justice Department probe into online lending conducted by dozens of banks and other companies. Critics have argued that the investigation is going beyond stamping out illegal activity and that it is intended to curb online lending even by those that are playing by the rules.

"I'm absolutely supportive of all efforts to enforce the law — federal law, state law — to cut out any abuses, any predatory practices," said Sen. David Vitter, R-La. "However, having said that, I'm very concerned that that has expanded to shut down that entire industry, whether folks are following the rules or not."

Democrats, meanwhile, raised concerns about the structure of short-term lending products — the high interest rates and the cycle of debt that can ensue — as well as the lack of other options available to borrowers in need of cash.

"I think we have a good understanding of traditional short-term or payday lending models that have existed in states for years, but I'm curious to know of any innovations... to loan products that may create more flexibility for consumers and, at the same time, help them to build credit histories that will move them towards more mainstream banking," said Sen. Robert Menendez, D-N.J.

Sen. Elizabeth Warren, D-Mass., reiterated her support for a plan to offer alternative loans to lower income and rural families via post offices in areas where bank branches are few and far between. She noted that bank branches are "rapidly abandoning" lower-income neighborhoods even as they are opening branches in affluent areas.

"With post offices in every ZIP code, that would solve the access problem. In fact, 58% of post office locations are in ZIP codes with zero or one bank branches," she said. "The post office could leverage its infrastructure to ensure that low-income families have access to banking services, that rural families have access to banking services, and that those services are offered at a lower price."

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