Battles over regulating pay day loans in California have been waging at the Capitol for years. The industry says it provides a service to consumers who otherwise wouldn't have access to money. The loans are for $255 at most and have to be repaid in two weeks. But critics say the sky high interest rates trap people in a cycle of repeat borrowing.
Paul Leonard is with the Center for Responsible Lending. He says the bill under consideration leaves the interest rates alone.
"We are starting with a position of trying to be in a position to compromise," Leonard says. "To try to find a middle ground between the two polar extremes that have marked the pay day lending debate in the Capitol for the last four or five years."
The trade for leaving interest rates alone would be a limit of six loans in 12 months per borrower and increasing the repayment period to 30 days.
But the industry says it's just more regulation that could drive lenders out of business. Greg Larsen represents the California Financial Service Providers Association.
"The demand for small amounts of credit is not going to go away," Larsen says. "And the risk is consumers will have to turn to other places for that kind of credit. And one of our concerns is that they will wind up turning to the unlicensed, unregulated Internet where they will have no protection."
The Senate Banking Committee will consider the bill at its meeting Wednesday afternoon.