Too often, people aren't calculating how quickly interest or fees can build up.
"The cycle of taking on new debt to pay back old debt can turn a single, unaffordable loan into a long-term debt trap," Richard Cordray, director of the Consumer Financial Protection Bureau, said in a statement.
Some people don't have other means -- such as a credit card -- to dig out of a financial jam. They might have low credit scores and not qualify for a typical credit card.
So consumer advocates want to see other types of lower-cost loans that pose less risk to consumers than payday loans.
Risk can go down if repayment can be spread over a longer time frame.
Small-dollar loans that last more than 45 days, for example, might replace some payday lending because they're not covered by the new rule that requires lenders to determine a borrower's ability to repay, Bourke noted.
But Bourke said there are a lot of harmful installment loans on the market today and it's possible that some payday lenders would expand into longer-term installment loans to offer a product that's not covered under the CFPB's rule.
As a result, he said, individual states may want to further regulate such loans.
Because the payday lending rules don't hit immediately, Bourke expects that some new types of loans might be tested. Consumers will want to look out for hidden fees or other traps.
The new rule exempts what are called "payday alternative loans" authorized by the National Credit Union Administration.