WASHINGTON—New federal rules for high-interest payday loans won't cap interest rates, a top official of the Consumer Financial Protection Bureau told lawmakers Thursday.

"We will not establish a usury cap and interest-rate limits on these or any other lending product," David Silberman, the CFPB's acting deputy director said at a House hearing. "We have not contemplated doing so and we will not do so."

Instead, he said, the rules will emphasize that lenders adequately assess borrowers' ability to repay their loans.

"What our research indicates is that we have a product that is not safe for its intended use and that there are a handful of people abusing the product," Mr. Silberman told lawmakers. "When this product is made without assessing the ability to repay, it's not safe for its intended use."

Mr. Silberman's testimony is certain to disappoint some consumer advocates who sought a strict standard for the small-dollar loans that are most often used by low- and middle-income consumers. But his remarks aren't surprising, given the CFPB lacks the authority to impose interest-rate limits on financial institutions.

Still, payday lenders have been warning that the CFPB's rules could put many of them out of business.

At the hearing before a House Financial Services panel, Republican lawmakers grilled him about the rules, which is expected to be formally proposed within the next few months. Lawmakers warned that the rules could choke off credit for vulnerable borrowers, while usurping the authority of state governments that currently regulate the sector.

While the 2010 Dodd-Frank law bars the agency from setting rate caps, states aren't under similar constraints. Currently, 15 states have imposed rate caps that effectively ban payday lending.

Consumer advocates have been pushing federal regulators to similarly employ usury caps on an industry where annual interest rates sometimes exceed 400%.

"I think the best intervention is a general usury cap," said Tom Feltner, director of financial services at the Consumer Federation of America. "States should keep the interest-rate caps that they have."

Indicating the effectiveness of interest-rate limits, the Obama administration in July revised the law aimed at protecting U.S. military service members and their families from predatory lending, imposing a 36% rate cap on a broader range of financial products.

Write to Yuka Hayashi at yuka.hayashi@wsj.com

(END) Dow Jones Newswires

February 11, 2016 19:15 ET (00:15 GMT)