"People in a tough situation with nowhere to turn may think their only option is to use such products," he said. "But if they get trapped in one of these loans, the fees alone can eat up all the money they can afford to repay, forcing them to keep on borrowing, over and over again."

Cordray noted, "Although we recognize that these loans can be helpful to people if they are used responsibly, we must make sure that consumers can get the credit they need without jeopardizing or undermining their finances."

The CFPB is currently in the late stages of deciding how to formulate new rules to reform the payday lending market, according to Cordray.

"We are also the first federal agency to supervise payday lenders and make sure they comply with federal consumer financial law. Last November, we took our first enforcement action against a payday lender, Cash America, one of the largest small-dollar lenders in the country," he said.

This summer, the CFPB took action against ACE Cash Express, "another large payday lender, for pushing payday borrowers into a cycle of debt," Cordray said.

"And, just last month, we sued an online payday lender, the Hydra Group, which was running an illegal cash-grab scam," he told the University of Michigan Law School audience.

Cordray added that discrimination might be the most damaging problem the CFPB is currently focusing on in the marketplace.

"The greatest challenges some consumers face are rooted in unlawful treatment based on prohibited characteristics like race or national origin. So we are seeking economic justice and the right to equal treatment in the financial marketplace based on individual merit and responsibility," he said.

Cordray said public disclosure of information could be a powerful tool to address discrimination in lending.