The NCUA's PAL program permits an APR of up to 28% and an application fee of $20 or less. Hank Hubbard, president/CEO of the $33 million One Detroit Credit Union, told CU Times shortly after the rule was proposed he doesn't think the CFPB proposal will affect his credit union's product, because it's a line of credit, not a closed-end loan. One Detroit's payday alternative has an annual fee of $70, much higher than the $20 PAL limit, but charges a lower APR of 18%.

The CFPB said in its release the rule also applies to open-ended payday products, so One Detroit might not be out of the woods yet. Hubbard also said he was concerned the rule would discourage lenders from even trying to offer a reasonable payday alternative and, even worse, would expand the illegal lending market.

Will the final rule stand as proposed or possibly have even tougher standards? Yes, if the CFPB bends to political and public pressure.

Immediately after the rule was released, The New York Times published an editorial with a scathing headline: “A Lame Response to Predatory Loans.”

A few days later, Rep. Debbie Wasserman Schultz (D-Fla.), who chairs the Democratic National Committee, dropped her support of a bill that would block the rule from taking effect after payday loan opponents pushed scathing ads in her district criticizing her for sponsoring the legislation. This being an election year, her change in position indicates voters support tighter payday lending rules. Money talks in Washington, but without re-election, that money is worthless.

The New York Times' editorial board pushed for the final rule to limit monthly payments to no more than 5% of the borrower's gross monthly income, which would spread the costs and fees over the life of the loan. The CFPB had originally considered that requirement, but the bureau dropped it.

A loan with monthly payments of 5% gross income or less sounds like your average consumer loan, not an emergency product. If borrowers qualified for a personal loan, they'd apply for one.

That's the problem with payday loans. Payday loan opponents paint a rosy picture of payday borrowers, describing them as homeowners who need to make roof repairs or finance car repairs.

Perhaps some borrowers fit that description, but I doubt it represents the majority or even a sizeable minority.

Anyone who qualifies for a mortgage and can maintain that large asset probably has other lending resources available.

Payday borrowers not only have no other financing options, they simply can't make ends meet. They're poor. Many of them are flat-out indigent, earning less than their monthly expenses.

If we really want to find a solution to payday lending, we must face the fact that many borrowers use the money for basic expenses like making rent or buying food. Perhaps they couldn't make rent because they were hit with an unexpected expense, but that still means their incomes don't allow them to build up savings or a good credit score.

When you can't afford the basics, or are just barely getting by, you certainly can't afford to repay a loan, regardless of how you use the funds.

The payday loan market is extremely risky because borrowers often can't – or because of personal issues won't – repay them. Sure, predatory lenders make the loans more difficult to repay, but if Kinecta's PALs default to the tune of a $20 average loss, there's no private sector solution that protects both the lender and the borrower. The idea that payday lenders are all greedy bastards who would still earn a healthy profit with lower rates and fees is a myth. A new CFPB regulation isn't going to change that sad fact.

The government needs to step in and provide a guarantee for lenders, or offer the loans themselves as a safety net for those who earn too much to qualify for welfare but still can't earn a living wage.

The idea that the government should keep Americans from going hungry and becoming homeless isn't new.

I'm sure plenty of readers are bristling at the idea of taxpayers footing the bill for payday loan borrowers.

But absent a meaningful increase in the minimum wage or more subsidized housing and food stamp programs, there doesn't seem to be another way.

The government also has the perfect storefront from which to offer these loans: The post office. Instead of the USPS competing with credit unions and banks that already offer mainstream services, the government agency should be used to provide financial services Main Street can't and back alleyways shouldn't.