They have names such as “Payday Loans” and “Cash Advances” and they can put you in a difficult financial position. Now, one local councilwoman wants to put limits on these businesses.

It seems like you see them almost everywhere - businesses that are designed to give you quick, easy access to cash. But a Sacramento City Council member says these lenders are most prevalent in poor and working-class neighborhoods.

Council member Sandy Sheedy has prepared a report entitled “Predatory Lending.” She’s recommending the city council use its power to limit the power of the quick payday loan stores.

Here’s the problem, as the report puts it:

In a typical scenario, a borrower writes a check for $100 and receives $85 in cash. In two weeks, the payday advance loans lender cashes the check. The annual percentage rate of interest for the transaction is 459%. So the borrower paid $15 dollars to use $85 dollars.

The report says borrowers get trapped in a cycle of debt when they use these services on a regular basis. One customer who spoke with CBS13 says the stores do provide a good service, but there’s plenty of room for improvement if they want to play fair.

The Sacramento council member’s report recommends using city land use powers to limit where future check-cashing stores can do business, and possibly putting a moratorium on new fast cash loan stores altogether.

Democratic legislators are working to strengthen fast payday loans laws, which advocates say cost borrowers from Keizer loan stores more than $420,000 in 2005 just in what they called “predatory” fees.

The legislation would further restrict the amount of interest payday cash advance lenders are allowed to charge to 36 percent annually. While proponents of the bill say it would bar lenders from charging what they call 300-plus percent annual interest, opponents seem to think the number-crunching is a bit disingenuous.

State Rep. Kim Thatcher, R – Keizer, said that while the fees on a two-week loan compounded over one year could add up to that amount, most borrowers pay their bill on time. Thatcher voted against House Bill 2871, which passed the House with Democratic support and is awaiting a vote in the Senate.

“These are usually repaid within a few weeks, and not within the period of years or months,” Thatcher said.

Legislation passed in 2006 capped the annual interest rate on a personal loan term of less than 60 days at 36 percent, but Our Oregon activist Angela Martin said payday loan companies simply extended the terms of their loans to 61 days, getting around the regulations.

According to numbers provided by Our Oregon borrowers paid payday stores in Keizer $422,000 in 2005 in penalty fees Martin refers to as “predatory.” They also said $4.7 million in fees were assessed from stores in Marion County during that same time.

It’s not the single borrowers who fall into what she called a “cycle of debt,” Martin said. With fees and interest, the amount ultimately owed to the payday loan company can balloon to double the principal amount if it is not paid on time. Some customers use a new no fax payday loan to pay off an old delinquent loan and the cycle continues, she said.

“When all you’re doing is paying more and more interest for no new money – that’s predatory,” she said.”

House Speaker Jeff Merkley, D – Portland, said it’s time to “take this genie, these 300 percent interest rates, back in the bottle.”

“We are concerned that payday lenders position themselves as the savior of low-income Oregonians who come to them,” Merkley said.

He said the advertising these bad credit cash loan companies pay for gives an impression of easy money, but in fact can lead the most vulnerable in society down the path of financial ruin.

The Keizer City Council addressed the issue in 2006, but ultimately decided to delay action to wait and see what the Oregon Legislature would do.

Thatcher said the legislation is “basically telling private businesses what they can charge for a product” and singling out one branch of the finance industry.

The bill’s opponents have said that these restrictions would essentially put cash advance payday loan stores out of business, and Thatcher said it would eliminate what for many Oregonians is a low-hassle way of getting money immediately.

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The national trade group for payday advance lenders has called on its members nationwide who make loans over the Internet to comply with all state laws and to be licensed in each state in which they do business.

The effort by the Community Financial Services Association announced Tuesday, if complied with by all payday lenders, could put an end to a lot of illegal short-term loans now available online to New Yorkers. That’s because New York state already bans such loans through its interest rate cap and other restrictions, and no payday lender is licensed to operate stores in the state.

However, consumers have been able to get high-cost fast cash loans online from a variety of sources, which a spokeswoman for the trade group said was legal. Now, its members would be prohibited from making loans that violate state law. Violators risk losing their membership in the industry’s only trade group.

“With this new change in best practice, our members are unlikely to lend to someone who has a New York address due to the regulatory environment,” said CFSA spokeswoman Lyndsey Medsker. “We want to be responsible. We want to protect consumers. With this new best practice, we won’t lend to people whose state regulations don’t allow it.”

But CFSA, whose members are all U.S.-based, represents only about 60 percent of the storefront easy payday loan locations in the country. And many of the online lenders are actually based offshore in countries such as Costa Rica, and don’t necessarily follow state or federal laws.

“Someone who lives in New York can still go online and get a loan,” Medsker said. “They’re just getting it from someone who isn’t necessarily following any rules.”

Consumer advocates, who denounce online payday loans as abusive and predatory, and have sought to prohibit them nationwide, downplayed the new rule’s significance.

“Once again, CFSA’s ‘Best Practice’ is to comply with state laws,” said Jean Ann Fox, director of consumer protection for the Consumer Federation of America. “Operating within the law is the least you should expect, not a ‘best practice.’ ”

Payday loans are short-term, small-dollar loans of about two weeks made against an upcoming paycheck or postdated check, or with authorization to take the repayment electronically from the consumer’s checking account. The personal loans, typically for amounts ranging from $100 to $500, carry finance charges of $15 to $30 over the two weeks, which equals an annual interest rate of 390 percent to 780 percent.

The loans are made by storefront lenders, check cashers and pawn shops, and are also available through toll-free numbers or the Internet. According to Little Rock, Ark.-based investment bank Stephens Inc., which has researched the industry for years, there are an estimated 24,200 U.S. stores.

In all, Stephens reports, the cash advance loan industry generates $47 billion in annual fees, including $5.65 billion — or 14 percent — online.

New York criminal law prohibits charging interest of more than 25 percent annually, and its civil banking law restricts unlicensed lenders further to just 16 percent. The state also bars check cashers from making loans and from accepting post-dated checks. That has effectively kept the payday lending industry out, as the most a store could legally charge is 95 cents for every $100 loaned.

Driving around Peoria, you probably see them all over. But what are you really getting yourself into when you sign up for a fast payday loan, asks one opinion piece on CentralIllinoisProud.com?

In need of some quick cash? Consumer advocates at the Better Business Bureau say, if you can help it - don’t go to one of those payday loan places.

“The problem with many of the payday loan concepts is people take the money and find out that they can’t pay it back in a timely manner,” Bonnie Bakin of the BBB, says.

Payday loans work like this: the establishment will ask you for a recent pay stub. You’re asked to write the company a personal check that’s dated for when your next paycheck comes. The company will grant you the loan, but keep in mind; the check you’re writing them is for more than the total of your loan. You’re paying extra to cover fees and interest.

“Usually it comes with a pretty steep fee,” Bonnie explains. “At this time, there’s nothing illegal about that.”

Worked out to an annual percentage rate, your interest fee could be upwards of 300 to 400 percent. And most payday lenders only give you two weeks to pay it back. The BBB says that’s when people can get into trouble. Many are forced to roll their loans over, again and again.

Bonnie says, “Until that person owes more money than they could ever imagine paying back.”

It seems you can’t go far in Peoria without running into one of these quick payday advance locations and experts say that’s the point. They say owners are setting up shop in strategic locations so they can suck as much money out of you as possible.

“They’re targeting the most vulnerable.” Tony Pierce a member of the Central Illinois Organizing Project, a faith-based group working toward justice for all citizens, including payday lending issues, said. “The average person taking out a payday loan makes only about 25 thousand dollars a year.”

Pierce says payday cash loans should be illegal, and his organization is working with the Illinois House and Senate to close loop-holes in payday lending. “In my opinion that’s loan sharking, which used to be illegal when the mob did it,” he says.

Tony’s mentored people who’ve gotten themselves deep into debt after taking out a payday loan. But, according to the BBB, very few people actually come forward with complaints. They’re either too embarrassed, or they don’t know how to properly file a complaint against the lender.

“These people can’t go to a bank,” Bonnie says. “These people have a bad credit rating, a bad work history - there’s something that prevents them from going to their bank to do this and that’s what makes them a target.”

She says if you absolutely must take out a check cash advance, there are some things you can do to protect yourself:

• Shop around for the best and lowest interest rates
• Make sure you find out what your responsibilities are in the transaction, and read your contract carefully
• If there’s something in it you don’t understand, don’t sign it until someone explains it to your satisfaction

But if you can’t pay back the loan, the BBB says the payday lender can take money out of your paycheck, take you to court… and ultimately, you could end up in jail.

“My advice to anyone in the public that would even be considering going to a no faxing payday loan lender is don’t, in capital letters. Don’t do it,” Tony warns.

We tried to contact a half dozen different payday lenders in Peoria. The businesses either didn’t return our calls, or they declined our request for an interview.

South Dakota Sen. Tim Johnson’s re-election campaign has raked in almost $20,000 so far this year from people who earn their living making high-interest loans to cash-strapped borrowers, Federal Election Commission records show.

Individuals employed by nine fast payday advance lending companies from across the country donated a total of $19,500 to Johnson’s campaign committee in the first three months of the year, campaign finance records show. That’s on top of the $37,600 that they and others in the industry donated to the Democratic senator last year.

The industry donated $500 to South Dakota’s lone House member, Democrat Stephanie Herseth, last year and no money during the past two years to Republican Sen. John Thune.

Johnson, who is recuperating from a December brain hemorrhage, is a member of the Senate banking committee, which has jurisdiction over no fax cash loan lenders. He is expected to seek a third term next year. In all, his campaign raised $633,208 in the first quarter of 2007.

Consumer groups say the donations are troubling because payday lenders trap low-income borrowers in a cycle of debt, a practice the groups want Congress to stop. Some of the lenders formed business relationships with small South Dakota banks to avoid state usury laws. South Dakota does not cap interest rates. Federal regulators put a stop to the practice last year.

Last year, Johnson criticized a proposal to impose a 36 percent cap on interest rates that guaranteed payday loan lenders charge members of the military. The Defense Department asked for the cap because thousands of military personnel had lost their security clearances because they were so heavily in debt to payday lenders. The proposal was incorporated into the 2007 defense authorization bill and became law.

“If we are to eliminate payday lending altogether or make it unusable, the question is, ‘Who fills the void?’ ” Johnson, whose son, Brooks, was in the Army at the time, asked during a hearing. “We need to make sure we don’t have unintended consequences that are worse than what we have now.”

Cash advance lenders, who often charge 390 percent to 780 percent annual interest, are legalized loan sharks, said Ed Mierzwinsky, consumer advocate for U.S. Public Interest Research Group.

“They are preying on American consumers,” Mierzwinsky said. “Congress cracked down on them when it came to the military, and now the industry is gearing up to make sure Congress doesn’t take the next logical step of protecting everyone.”

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Struggling Missourians gave no fax payday loan companies $317 million last year alone.

Few laws protect borrowers from the fees and high interest that those companies charge. What’s worse, the laws that are on the books aren’t always enforceable because of a loophole.

Some lawmakers proposed bills that would tighten the restrictions on payday advance loan companies. One payday loan borrower says passing a law would do nothing to help struggling Missourians if it’s not enforced.

Lee Griffin of Springfield says he’s fighting a losing battle.

“I thought it was going to help but it didn’t,” said Griffin.

Griffin needed some money two years ago, so he went to an instant cash loan company. He now says it was one of the biggest mistakes that he ever made because “a few months later, I was running so short because I was trying to make payday loans; I didn’t have enough for my other bills.

Griffin got another payday loan to try to catch up - and then another. He borrowed a total of $2,500 and is now paying $425 a month to pay it off, but he feels like he’s getting nowhere

“Since this all began with the first loan, I’ve paid $8,250. My principle has dropped $660,” said Griffin.

There is a law in place meant to protect faxless cash advance borrowers like Griffin from spiraling out of control.

“No borrower shall be required to pay a total amount of accumulated interest and fees in excess of seventy-five percent of the initial loan amount on any single loan,” the law says.

So far, however, Lee has paid more than 3000 percent in interest, and he wants to know why.

The answer, according to Attorney General Jay Nixon - is a loophole in the law that applies to these bad credit payday loans.

The problem, Nixon says, is current law doesn’t prevent renewals. Therefore, if you need more money and combine your current loan balance with a new one, the 75-percent rule doesn’t apply. That’s exactly what happened to Griffin.

“What happens often is the interest rate seems smaller and you don’t get it paid off and you renew it and the interest rate just gets bigger and bigger,” said Nixon.

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The only faxless payday advance lender left in West Virginia settled with Attorney General Darrell McGraw Wednesday.

McGraw says he has reached an agreement with Valued Services of West Virginia, doing business as First American Cash Advance, resolving his investigation of its payday lending practices. He says First American is the state’s last fast payday loan lender.

Approximately $616,000 in loans allegedly owned by 2,700 West Virginians will be forgiven, and FACA will pay $200,500 to the state for “consumer protection purposes,” McGraw’s office said.

Also, $22,000 will be paid to distribute to approximately 400 consumers who paid interest charges on pay day loans after May 31, 2006.

Payday loans are short-term loans, typically for 14 days, that are secured by a post-dated check or by an agreement authorizing an electronic debit for the full loan amount, plus fees, from the consumer’s account.

“My office has long been concerned about the spiral of debt that often results when already cash-strapped consumers turn to payday lenders for help,” McGraw said. “Consequently, I am pleased that FACA has decided to discontinue operations in West Virginia. I also commend FACA for acknowledging our concerns about [payday cash loan] lending and for its cooperation with our office.”

FACA had 11 locations in West Virginia before shutting down in July 2006.

Also settling with McGraw was Community State Bank of South Dakota, which charged interest rates that were permissible in the state it was headquartered, South Dakota. Those rates were not legal in West Virginia.

When the Federal Deposit Insurance Corp. decided it would not allow that to take place, the bank decided it would no longer issue bad credit cash loans through FACA at its West Virginia locations, resulting in FACA’s closure.

Texas Attorney General Greg Abbott has sued EZCorp Inc., an Austin-based payday loan company and pawn shop operator, accusing it of dumping “hundreds of documents containing sensitive personal identifying information” into publicly accessible trash bins.

In a lawsuit filed Tuesday in state District Court in Bexar County, Abbott’s office said the documents, which include customers’ applications for cash loans or pawn services, were dumped outside EZCorp stores in Austin, San Antonio, Lubbock, Houston and five cities in the Rio Grande Valley.

The documents include applications for loans that require a customer to list his or her address, Social Security number, bank account numbers, date of birth and driver’s license number.

“Identity theft is one of the fastest-growing crimes in the United States,” Abbott said in a statement. “Texans expect their personal information to remain confidential.”

EZCorp “failed to shred, erase or otherwise make the sensitive personal information unreadable,” the state’s lawsuit says. “Instead, records were placed in trash dumpsters that were readily accessible to the public.”

The state is seeking potentially tens of millions of dollars in fines under laws governing deceptive trade practices, identify theft and the regulation of so-called payday cash advance lenders such as EZCorp.

The suit also asks the court to order EZCorp to implement a program to protect customer information.

The no credit check payday loan company has strong privacy policies, but will work to improve them, CEO Joseph Rotunda said in a statement.

“EZCorp has strong identity protection policies and systems in place, including a state-of-the-art ‘paperless’ document system, written document retention policies, and regular audits to ensure compliance,” Rotunda said.

He said the company “invested additional resources in technology and information security” after Texas passed an identity-theft law in 2005.

Rotunda said “the issues cited by the attorney general appear to be the result of human error. We are committed to working closely” with Abbott’s office on the issues.

Rotunda’s statement didn’t address the possible fines to be assessed to this personal cash loan operation.

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The head of the association that represents 23 instant payday loan companies in Canada is concerned that legislation to regulate the industry might not pass before the end of the spring legislative session.

“Bill-43 (the Payday Loans Act) should be a priority of the Saskatchewan government,” said Stan Keyes, president of the Canadian Payday Loans Association. “Only then will consumers be protected; only then will industry players be able to operate viably; only then will legislation and regulation prohibit the bad business practices and excessively high fees that come with an unregulated industry.”

“Now I’m troubled that the [payday cash advance] legislation may not get passed in the next few weeks before the (legislature) breaks for the summer,” he added in an interview Monday.

The bill requires 20 hours of debate before it can be passed and, with the session scheduled to prorogue next week, the legislation could die on the order table.

Payday loans online are short-term, high-interest loans that are typically repaid to the lender by the next pay period. According to the association, which represents 500 of the 1,350 payday lender outlets in the country, two million Canadians use payday loans every year.

The federal Conservative government recently passed legislation to exempt payday loans from Section 347 of the Criminal Code, which prohibits loans with interest rates in excess of 60 percent.

A typical 14-day, $300 payday cash loan would cost the borrower $50, which would equate to an annual rate of interest of 435 percent.

But Keyes said payday loan companies can’t be compared with conventional loans offered by chartered banks and their annualized percentage rates (APRs). “It’s the wrong measure for payday lenders. We deal in short-term, small-sum loans.”

Keyes said a typical $20 fee on a $100 payday loan includes $5 for defaults, which occurs with 20 to 25 percent of the cash advance loans.

The provincial legislation, which was introduced March 12, would set maximum limits on payday loans, allow consumers to cancel loans without penalty the day after the loan was made, prohibit more than one payday loan per customer and prohibit lenders from making claims on future wages and making loans contingent on purchase of other product or service.

Keyes said he hopes Saskatchewan will join Manitoba and Nova Scotia in passing the legislation regulating the cash advance payday loan industry.

“If you want to ensure you’re offering maximum protection for the consumer, the only way you do that is to pass legislation, then begin to work on regulations,” Keyes said.

Justice Minister Frank Quennell said Bill 43 is a “specified bill” and, as such, must be passed in the current session, which ends May 17.

“So there’s no danger of the bill not passing,” Quennell said. “It’s one of the bills the government had the opportunity to specify as a bill that had to pass in the session. Therefore, it will pass.”

The state should cap interest rates charged by payday lenders, limit the number of personal loans people can take out and more closely monitor the establishments, a state senator and community group urged.

“We are trying to keep people from a position of financial ruin from going from one check casher to the next to try to pay for the first loan and eventually end up in a financial position” they can’t get out of, Democratic State Sen. Ray Miller said Monday night at a meeting of BREAD, an advocacy group comprised of 50 Columbus religious congregations.

Miller recommended developing a statewide database to track the number of outstanding no fax payday loans people carry with payday lenders.

The Ohio Department of Commerce, which regulates payday lenders, says it currently limits people to one loan at a time per lender. Miller, concerned that patrons could get stuck in a cycle of using one faxless payday loan to pay off another, also suggested limiting the number of loans a person can have at one time.

The organization that sponsored the meeting, BREAD, which stands for Building Responsibility Equality and Dignity, wants the state to cap lenders’ annual rate at 36 percent, the same limit the federal government applied to interests on loans for military families last year.

Fast payday advance customers aren’t complaining, so the oversight isn’t necessary, said Jamie Frauenberg, president of the Ohio Association of Financial Service Centers.

Capping the interest rates won’t eliminate people’s need for payday advances and will drive payday lenders out of business, he said. Frauenberg is also vice president of store operations for Check Smart.

“That need is not going to go away,” and without quick cash loan lenders people will seek out illegal loans, Frauenberg said.

Ohio has seen a steep increase in the number of payday lenders since 1996, when only 107 payday lenders operated in the state. Within a decade that number ballooned to 1,562, according to a report issued in February by Policy Matters Ohio, a Cleveland-based economic research organization.