Pignanelli said when "usury limits were proposed, it brought out everyone in the industry."

He says they asked him to work with payday lenders to find reasonable regulation and avoid interest caps.

So, Pignanelli also became the attorney, lobbyist and spokesman for the payday loan industry's Utah Consumer Loan Association.

"I was hesitant at first, because I had heard horror stories that these were bad people who charged high rates. But when I looked into it, I found it was a good industry," he said.

Arguments

Pignanelli says payday lenders must charge high interest because they are dealing with people with poor credit whose loans are not secured. He says companies need to cover the costs of loan processing and make a profit. He says any interest rate cap that falsely manipulates market demand could put many of them out of business.

Hilton scoffs at that assessment.

"There are many states with caps," she said. "Not only have payday lenders there not gone out of business when those laws passed, but the number of outlets in the states continues to grow. . . . They are making money."

Christopher Peterson, a native Utahn who is a University of Florida law professor and an expert on the high-credit industry, says states always imposed usury caps until recent decades — and Utah abolished its usury cap only in the early 1980s.

Further, Hilton scoffs at mainstream banks worried that a cap of 500 percent or so targeted at payday lenders could also hurt them.

"They don't charge interest anywhere near that high," she said. "They just worry it might make someone decide that since one interest rate was capped that, gee, maybe it would be good to also cap mortgage rates and other bank loans, too."

But Pignanelli says even the perception that Utah is becoming a little more unfriendly to the financial industry could have dire consequences.

"If the state puts a usury cap on, it is a signal that the state is unfriendly to financial institutions," he said. "It could lead to industrial banks going elsewhere."

Also, if payday lenders are put out of business, he says their current customers would end up instead paying high bounced-check fees, utility reconnection charges and other fees costing more than current loans.

"So, it would hurt everybody," he said.

Pignanelli also charges that most people who use payday loans are satisfied with them and that critics falsely make it sound like high numbers are pushed into bankruptcy or other problems by such loans.

Pignanelli says a survey conducted for the industry in Utah last year shows 77 percent of payday borrowers were satisfied with their loan experience.