Rep. Jeff Greer, D-Brandenburg, chairman of the House Banking and Insurance Committee, said Wednesday that he doesn’t plan to call House Bill 381 for a hearing this session because he wants to give a new electronic system meant to monitor the payday industry time to work.

Greer, whose committee heard testimony about the system from the state Department of Financial Institutions on Wednesday, said in an interview that the state needs time to gather data it currently lacks.

“We need to do this right,’’ he said.

Greer said he would consider hearing a bill to cap payday fees next year but added, “We don’t want to go into it blind.”

His decision disappointed those who want to limit charges on the short term cash loans they say amount to annual interest rates of 400 percent.

“The real problem is the cost of the loans,” said Rich Seckel of the Kentucky Legal Justice Center, an advocacy group affiliated with Legal Aid. “The database doesn’t lower the cost of the loans and the frequency of the loans.”

Critics of the industry said the high cost of the loans traps people in debt, forcing them to keep taking out loans to pay off previous ones.

Kentucky law allows people to take out two loans every two weeks that together total $500 at a cost of $15 per every $100.

Charles Vice, commissioner of financial institutions, testified Wednesday that his department regulates payday loans but has no idea of the extent of the industry’s business in Kentucky.

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The Federal Deposit Insurance Corp. has made banking access for low-income consumers a priority, according to agency spokesman David Barr. A December FDIC survey found there were 17 million U.S. adults with no bank accounts and 43 million who rely on financial services such as payday loans.

The FDIC launched a pilot program in 2008 to encourage banks to make loans of as much as $1,000 with interest rates at 36 percent or less. Thirty-one banks participated, making 16,000 loans for a total of $18.5 million.

In contrast, payday stores and Internet lenders make about $42.1 billion in loans a year, according to Stephens Inc., an investment bank and financial research firm. Lenders earn about $7.3 billion on fees from those loans, according to the company.

Consumer groups oppose payday loans whether they’re being made by a bank or a payday lender, said Jean Ann Fox of the Washington-based Consumer Federation of America. Wells Fargo, U.S. Bancorp and Fifth Third’s cash advance products are structured exactly like payday loans, she said.

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“We’ve had an overwhelming 6000% increase in loan contract offers over the past three years. What we’re finding is our clients are using our service as a viable alternative to credit cards and personal loans. They like the idea that there is no long-term debt associated with our cash advances. Our responsible lending practices mean they are unable borrow amounts they can’t afford. Additionally, we’ve gained trust in the market place by offering first-time loans for just $2, so people have a chance to try us out. We’ve decided to continue the offer indefinitely as it’s working well for us”.

Mr Ellis believes that this growth will continue to expand as payday loans and payday lenders like Cash Doctors cement a positive presence in the industry and more consumers become aware of the product and its benefits.

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The special exemption for the industry from the state’s usury cap of 36 percent expires June 30. And voters, on a 32 margin, killed an industry sponsored initiative in 2008 to make that exemption permanent, even after lenders agreed to cut fees to $15 per $100 borrowed.

This new bill still has that $15 fee, about 390 percent on an annual basis, with a few other changes industry lobbyist say makes it a better deal for borrowers. Campbell, however, said that’s still too much and still not a good deal for borrowers.

Industry lobbyist Lee Miller said lenders cannot live with the 36 percent annual cap, saying that would never cover their costs on a twoweek loan for $100. Miller said he will consult with lenders to see if they can live with something less than 390 percent.

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The lenders serving risky borrowers say high fees and interest rates are necessary because their customers are more likely to default on loans. Restrictions on what they charge could put them out of business, and leave the neediest with no options at all, they say.

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“If there is a business model that allows people to earn a fair rate of return at 36 percent for challenging credit, I will support that business model, but people who charge people 300 percent would make the mob blush,” Romer said.

Payday loans industry supporters counter that they provide a business that 300,000 Coloradans use and can’t get anywhere else.

“These people are not without alternatives. They choose in overwhelming numbers the product that makes the most sense for them,” Ron Rockvam with the Colorado Financial Service Centers Association said.

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What they don’t say is that, left to their own devices, payday loan sharks attach to that “option” interest rates that would make criminal loan sharks blush. Payday lenders demand, and get, as much as 520 percent interest on the loans they provide to the elderly and the working poor.

For this reason, the only meaningful regulation of the payday loan sharks is a cap on the amount of interest they can charge. Any other “regulation” is a comic intervention by politicians trying to look like they are serious about protecting consumers while doing little or nothing of consequence.

Unfortunately, Assembly Speaker Mike Sheridan, D-Janesville, and his allies have proposed a sham “reform” measure that fails to cap interest rates. Claims by Sheridan and his allies that this legislation is a meaningful response to abuses by payday lenders are insulting to the intelligence of Wisconsinites.

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A spokesperson from Lending Stream commented, “We believe all our customers have the right to fair and affordable credit. History tells us that no business has ever come so far with the intention of fleecing their customers. We are proud of our lending practice and can confidently claim that we offer customer friendly services.”

A payday loans can come in handy when people are turned away by high street banks while their needs for cash are rather urgent. Contrary to the popular belief, these cash alternatives cost less than an unplanned bank overdraft, which makes them a natural and practical choice for short-term borrowers.

However, people need to be careful before and after taking the loan to ensure that they do not fall to the guile of loan sharks or get into a debt mess themselves.

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A plan that would cap loans at $600 passed out of committee on Wednesday and could be taken up by the full Assembly as early as Tuesday.

Democratic Senate Majority Leader Russ Decker says the Senate will consider a different bill that may include a rate cap for payday loans.

Republican Senate Minority Leader Scott Fitzgerald says the Legislature should slow down because there’s a cloud over the issue. Democratic Assembly Speaker Mike Sheridan has admitted dating a lobbyist for the payday lending industry.

Decker says regulating the industry has been discussed for years and he thinks the Legislature will act this session.

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Any more than a drug user needs another fix, a Pay Day loan is NOT a ’solution’ to debt problems …get a ‘pay day’ loan and the ‘very nice men’ in the sharp suits who come round to ‘collect’ the payment won’t be quite as understanding as your Bank, Credit Card Co. or Mortgage provider.

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