Does a cap of 100 percent annual interest on loans sound high? Payday lenders argue it would be too low for them to make enough money to stay in business.

But Rep. Laura Black, D-Sandy, is pushing such a limit anyway, saying she has seen too many people trapped and financially drained by high-rate payday loans. A 2005 Deseret News survey showed they charge a median 521 percent annual interest in Utah — five times more than the limit she seeks — or $20 for a two-week loan of $100.

The payday loan industry's Utah Consumer Lending Alliance says competition has driven down the cost of such a loan recently to about $15 for a two-week loan of $100. It says such a loan costs $13.95 to generate. But the proposed 100 percent interest rate cap would allow charging only $3.60 for such a loan.

"You can't spend $13.95 on a loan and sell it for $3.60 any more than you can spend 30 cents to make a cheeseburger and sell it for a nickle," a written statement from the industry group said. Its lobbyist, Frank Pignanelli, added, "It would force the industry out of business here."

Black doesn't believe the industry could not make money charging 100 percent interest, but adds that she would shed no tears if the industry left Utah.

Black said she gained a distaste for payday loans while serving on the board for Habitat for Humanity. She said that charity requires people seeking homes through it to clear their credit and debts, "But one of the issues affecting many of them is they were sucked in by payday lenders, and it's tough to get out of the hole they create."

She said many people take out a $500 loan for two weeks, but cannot pay it on time. So they take another loan to cover the first, then another and another up to the 12-week limit for such "rollovers." She said interest on a $500 loan at those rates after 12 weeks costs essentially another $500 — about 100 percent interest in that time period.

Because payday lenders are not supposed to charge any more interest on loans that have been rolled over the maximum-allowed 12 weeks, Pignanelli argues that means a 100 percent cap for the year (or forever) on that particular loan essentially is already in place.

But Black said she's heard stories of borrowers being encouraged to take out other payday loans, including from other lenders, to cover payments on the initial loan they obtained. She said many eventually pay many times the cost of their original loans in interest.

But the payday loan industry's Community Financial Services Association says 95 percent of customers pay off their loans on time, and only half of the remaining 5 percent eventually default.