Clearly, We Have All Learned Our Lesson.

House Preparing To Legalize Payday Loans With 391% APRs

WASHINGTON (AP) — The payday loan industry, threatened by Congress with extinction, has deployed well-connected lobbyists and hefty sums of campaign cash to key lawmakers to save itself.

The strategy has paid off.

Now a top Democrat who once tried to ban the practice is instead pushing to regulate it — a result, he says, of the industry's lobbying clout.

The lawmaker, Rep. Luis Gutierrez, D-Ill., says his bill does have crucial protections for borrowers and represents the best deal he can manage in the face of the industry's aggressive lobbying. Consumer groups are condemning the bill as a loophole-riddled gift to the industry.

"While they may not be JP Morgan Chase or Bank of America, they're very powerful. Their influence should not be underestimated," Gutierrez, the top Democrat on the Financial Services subcommittee in charge of consumer credit issues, said in an interview this week.

Payday loans are small, very short-term loans with extremely high interest rates that are effectively advances on a borrower's next paycheck. They're typically obtained when a borrower goes to a check-cashing outlet or an online equivalent, pays a fee and writes a postdated check that the company agrees not to cash until the customer's payday. Finance charges typically amount to annual interest rates in the triple digits, around 400 percent, and can go as high as double that.

The loans are controversial, with advocates, including many black and Hispanic lawmakers and interest groups, arguing they are the only quick credit option for millions of low- and moderate-income people. Critics contend they are inherently abusive products that trap borrowers in a devastating debt cycle.